The IT Industry is kicking off earnings season with TCS results announcement on April 12. Second in line is Bengaluru-based IT major Infosys, which is set to announce its fourth-quarter results on April 13. Ahead of the results, here are five key things to watch out for.
Revenue growth
Infosys revenue growth likely to be in the range of 1-2.4 per cent, weighed down by macroeconomic headwinds. Brokerages expect revenue growth in the range of 1 per cent – 2.4 per cent quarter-on-quarter(QoQ). Growth is expected to be soft due global slowdown woes and seasonal weakness.
Margin and Guidance
Margins are expected to improve this quarter aided by a favorable currency mix, higher utilization, lower sub-con costs, and pyramid gains. Brokerages expect an improvement of around 90 bps QoQ. However, Phillip Capital has noted that “Margins are expected to decline marginally by -10bps qoq – impacted by lack of growth leverage and visa costs offset by easing supply-side pressures.” The company is expected to provide revenue growth guidance in the range of 6-8 per cent and margin guidance in the range of 21-23 per cent.
Attrition and hiring
In Q3, Infosys’s attrition dropped to 24.3 per cent and the total headcount stood at 346,845 people. For the fourth quarter, attrition is expected to be moderate by the brokerages. Fresher hiring targets are to look out for as the IT industry at large has slowed down hiring.
View on top-level exits
Infosys has seen two senior-level exits in the recent past. Infosys’s President and COO Ravi Kumar S has taken an exit and is currently the CEO of Cognizant. Its President Mohit Joshi too has resigned and is presently named the CEO designate of Tech Mahindra. Post the exits, it is to be watched out how the re-allocation of responsibilities and portfolios will be done.
Management Commentary
Management commentary on demand outlook, client spending, deal TCV’s and pipeline, vertical and geography commentary, pricing pressure on realizations, vendor consolidation opportunities, margins, and attrition are to be looked out for.
Given that the BFSI sector is a major revenue-contributing vertical, the recent banking fiasco in the US involving Silicon Valley Bank (SVB), Credit Suisse, Silvergate, and First Republic Bank may weigh down tech spending by the sector, thus showing an effect. Commentary on the exposure Infosys has is to be watched out for.
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Published on April 12, 2023
