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Infosys also revised its FY21 operating margin guidance to 24.0-24.5% from the earlier guidance of 23-24% (REUTERS)
Infosys also revised its FY21 operating margin guidance to 24.0-24.5% from the earlier guidance of 23-24% (REUTERS)

Infosys raises revenue forecast, Wipro Q3 net profit up 21%

  • Infosys’ net profit for the December-ended quarter rose 16.6% to 5,197 crore from the year-ago period
  • Wipro said it expects its revenue growth for Q4 to be in the range of 1.5-3.5% driven by improving demand environment

Information technology (IT) services firms Infosys Ltd and Wipro Ltd’s third-quarter earnings cheered investors by beating analyst estimates on all fronts – guidance, revenue and profit.

Infosys raised its revenue growth guidance for 2020-21 to 4.5-5.0% from 2-3% it had guided in the previous quarter, on the back of strong business momentum and deal pipeline.

Infosys also revised its FY21 operating margin guidance to 24.0-24.5% from the earlier guidance of 23-24%.

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Infosys’ net profit for the December-ended quarter rose 16.6% to 5,197 crore from the year-ago period. Revenue also grew 12.3% y-o-y to 25,927 crore, driven by broad-based growth across verticals such as financial services, high tech and manufacturing. The closely-watched dollar revenue grew 8.4% from a year ago, and 6.2% sequentially to $3.51 billion on the back of large deal wins worth $7.13 billion.

As per Bloomberg consensus estimates, Infosys is expected to clock revenue of 25,182.90 crore and a net profit 5060.6 crore. Wipro is expected to post revenue 15490.9 crore and a net profit 2551.8 crore.

“Execution of client relevant strategy focused on digital transformation continues to drive superior growth, well ahead of the industry," said Salil Parekh, CEO and MD, Infosys. “With the intense focus on client needs and the comprehensive foundation built on differentiated capabilities, I remain confident about the future."

The Bengaluru-based firm, which has been betting big on cloud and emerging technologies, saw its digital revenue grow 31.3% y-o-y in constant currency to $1.76 billion, contributing 50.1% to the total revenues for the December quarter.

Cross-town competitor Wipro which announced its earnings on the same day, reported a nearly 21% y-o-y increase in net profit to 2,967 crore and revenue improved 1.3% annually to 15,670 crore. Its revenue in dollar terms grew 3.9% q-o-q to $2.07 billion on the back of large deals signed worth $1.2 billion, marking its highest growth in 36 quarters.

Wipro said it expects its revenue growth for Q4 to be in the range of 1.5-3.5% driven by improving demand environment especially for digital transformation, digital operations, and cloud services.

“Our growth is at the upper end of our guidance and was the highest in 36 quarters…the growth in revenues was broad-based across sectors and markets and led by a surge in volumes," said Thierry Delaporte, CEO & MD, Wipro.

Delaporte said the growth has been restored and will accelerate in the next few quarters to eventually getting ahead of the competitors.

Infosys and Wipro’s earnings come after Tata Consultancy Services Ltd, which reported its results last week and said it is targeting a double-digit growth in revenue this financial year on hopes that it will continue to benefit from the pandemic-induced boom in digital and cloud services.

Analysts believe the earnings are a testament to the maturity, resilience, and agility of the Indian IT services industry.

“Infosys and Wipro’s quarterly results are noteworthy for the increase in their digital and cloud revenues, improved operating margins, reduced attrition and a healthy deal pipeline. Their ability to close multi-billion dollar strategic deals speaks favourably to their client centricity and increased risk appetite as they pursue sustainable digital revenue growth," said Nitin Bhatt, Technology Sector Leader, EY-India.

Effective 1 January, as part of simplifying its organizational structure, Wipro has replaced the current structure of various strategic business units, service lines and geographies with four strategic market units (SMUs) and two global business lines (GBLs). The four SMUs are Americas 1, Americas 2, Europe and Asia Pacific Middle East Africa (APMEA). While Americas 1 and Americas 2 will be organised by sectors, Europe and APMEA will be structured by countries.

The GBLs are known as iDEAS (Integrated Digital, Engineering and Application Services) and iCORE (Cloud Infrastructure, Digital Operations, Risk & Enterprise Cyber Security Services).

Wipro which has been lagging peers for several years now is looking at a course correction under Delaporte, who joined the company last July.

Delaporte has embarked on a five-point strategy that revolves around growth, focus and scale, offerings, building talent with domain expertise, and simplification of the operating model.

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