Bengaluru: Infosys Ltd, India’s second largest software exporter by revenue, posted a strong set of numbers on Friday, a day after the country’s largest information technology (IT) services provider Tata Consultancy Services Ltd missed earnings estimates.
Following a seasonally strong second quarter, Infosys raised the lower end of its fiscal year 2020 revenue guidance, revising it to 9-10% from 8.5-10% earlier, on the back of strong momentum in large deals and market share gains.
Analysts at Emkay Research said they were “surprised that Infosys did not raise the revenue guidance at the upper end despite the confidence of strong order booking as well as H1FY20 revenue performance".
The company declared its second quarter earnings after market hours.
Net profit for the second quarter ended 30 September stood at ₹4,037 crore, up 6.2% from ₹3,802 crore in the June quarter, as revenue grew 3.8% sequentially to ₹22,629 crore from ₹21,803 crore.
The management said growth was broad-based across industry segments and geographies.
The closely watched dollar revenue grew 2.5% sequentially to $3.21 billion from $3.13 billion in the June quarter. The company signed large deals worth $2.8 billion during the quarter, a significant part of which were renewals.
“Our performance was robust on multiple dimensions—revenue growth, digital growth, operating margins, operational efficiencies, large deal signings and reduction in attrition," said Salil Parekh, chief executive (CEO) and managing director of Infosys.
“All these are clear signs that we are progressing well in our journey of client-centricity and maximizing value for our stakeholders," he added.
Financial services and retail segments accounted for nearly half of the revenue, almost the same as in the June quarter. While revenue from financial services grew 8.6%, retail revenue declined 0.6% from a year ago, given the slowdown in retail sentiment due to the US-China trade war.
Operating margins for the July-September quarter stood at 21.7%, up 1.2 percentage points from 20.5% in the first quarter.
“We saw expansion in operating margins during the quarter driven by improvement in operational parameters and cost efficiencies," said Nilanjan Roy of chief financial officer of Infosys.
The company’s digital revenue stood at $1.23 billion (38.3% of total revenue), a year-on-year growth of 38.4% and a sequential growth of 10.7% in constant currency terms.
Parekh said the company continues to gain market share in the $160 billion digital market.
“In terms of digital, mostly these are new mid-term to long-term contracts," the management said during an analyst call.
Attrition rate declined to 21.7% from 23.4% in the April-June quarter, an indication that various steps taken by the management in terms of reskilling its workforce and offering skill-based incentives are bearing fruit.
Infosys added 28 active clients in the second quarter. The total number of clients in the first quarter was 1,336, which increased to 1,364 in the second quarter.
However, client growth during the quarter was limited to the $1 million revenue bracket as the company failed to add any big client in the $100 million-plus revenue bracket.