Infosys (INFY) Beats Q2 Earnings and Revenue Estimates

Shares of Infosys INFY gained 4.1% on Wednesday after the IT consulting and outsourcing services provider reported greater-than-expected second-quarter fiscal 2021 results. The company’s second-quarter adjusted earnings of 15 cents per share surpassed the Zacks Consensus Estimate. Moreover, quarterly earnings jumped 15.4% from the year-ago quarter’s earnings per share of 13 cents.

Infosys’ fiscal second-quarter revenues increased 3.2% to $3.31 billion year over year and surpassed the Zacks Consensus Estimate of $3.23 billion as well. In terms of constant currency (CC), the metric was up 2.2%.

Rise in large deal wins and fast-growing digital services were key catalysts. Solid demand for its services in cloud, IoT, cyber security, SaaS, user experience, data and analytics is a major driver.

Infosys Limited Price, Consensus and EPS Surprise Infosys Limited Price, Consensus and EPS Surprise

Infosys Limited price-consensus-eps-surprise-chart | Infosys Limited Quote

Revenue Details

Digital Revenues (47.3% of total) climbed 27.4% year over year (25.4% at cc) to $1.57 billion, while Core Revenues (52.7%) declined 11.9% (down 12.1% at cc) to $1.74 billion.

The company recorded revenue growth across all of its geographical regions. India recorded the highest growth of 15.8% on a reported basis and 20.4% on CC. Revenues across North America, Europe, and Rest of the World regions recorded year-over-year increase of 2.1%, 4%, and 4.5%, respectively, on a reported basis. On a constant-currency basis, the regions registered respective growth of 1.9%, 0.6%, and 3.7%.

Segment wise, Hi Tech registered the highest growth of 24.4%. Life Sciences, Financial Services, and Retail rose 9.3%, 3.7% and 0.7%, respectively. However, Manufacturing, Communication, and Energy, Utilities, Resources & Services recorded a decline of 7%, 0.8% and 2.8%, respectively.

The company added 96 clients during the fiscal second quarter. It also signed multiple large deals of contract value (TCV) worth $3.15 billion. The TCV recorded during the quarter was highest ever in the company’s history.

Though headwinds in the financial services segment are still a concern, growing traction in the commercial and corporate bank, consumer, cost and payments, wealth management and custody plus mortgage portfolios of its business is an upside.

The company reported that its clients worth more than $100 million now add up to 30, up from the first-quarter number of 25 clients.

Other Financial Details

Gross profit climbed 10.9% year over year to $1.19 billion. Gross margin expanded 250 basis points (bps) on a year-over-year basis to 35.8%.

The company’s operating income jumped 20.7% year over year to $840 million. Operating margin expanded 370 bps to 25.4%.

Infosys ended the fiscal second quarter with cash and cash equivalents of $3.04 billion, up from the fiscal first-quarter level of $2.52 billion.

Zacks Rank and Other Stocks to Consider

Infosys currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the broader technology sector include Zoom Video Communications ZM,, inc. CRM and Intuit Inc. INTU, all sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Zoom, Salesforce and Intuit is currently pegged at 25%, 15.7%, and 14.5%, respectively.

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