Infosys Q1 2013-14 results took most people by surprise.  The results were above most analysts’ expectations.  I had expected the company to lower forecasts, but it seems like the 6-10% range was wide enough to absorb currency fluctuations that were expected to have an impact of 1-2%.  Moreover, it seems like the forecasts were perhaps sandbagged in April, after the company struggled to meet forecasts for several quarters now.

Infosys results1The quick takeaways are that revenues (in USD terms) grew 2.7% sequentially, margins are expected to be lower in future quarters, and attrition rate is uncomfortably high.  If one were to read between the lines, the sequential revenue growth in subsequent quarters is likely to be almost flat.  This may not be great news unless of course, the company is sandbagging again.

The market’s initial reaction was euphoric.  When the market learns about the sequential (almost) flat growth, will the gains hold ?  Perhaps it may, until the next quarter.  Recall that Infosys has had a roller coaster ride over the last few quarters.  The December quarter saw double digit gains in January, only to be followed by double digit losses in April, and now double digit gains in July.

Knowing Mr. Murthy well, I had expected him to present all the bad news in this earnings release.  He recently said in a speech – “Bring the bad news early and pro-actively to your investors. I always say, let the bad news take the elevator, good news can take the steps.”  Does this earnings release signify that all the bad news is behind us ?  My fear is that the news may be even worse than he thinks it is.

As far as the rest of the industry goes, while Cognizant, TCS and HCL have recently performed much better than Infosys, I believe they may witness a slowdown this year.  To gauge trends, I would go more by Accenture’s results a week or so ago, than by Infosys’ results this quarter.


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  1. To me , Infosys results were not a surprise at all. With the rupee being smacked to an all time low and with salary expense being mostly paid in rupees, it is a no-brainer that results would be good. The proposed Immigration reform is being written off by the market as a non starter. My own long held belief has been that unless quality improves, the writing is on the wall. For now the market and the investors are dipping into the bowl of Kool Aid.

  2. Sankar, the bottom line being better was not a surprise for the reason you indicated. The topline was however a surprise to most. All the major currencies depreciating against the dollar would have had an adverse impact in dollar terms, and yet the company reported 2.7% sequential growth which was above expectations. But again, the company didn’t raise its guidance which suggests that perhaps they don’t believe this is sustainable growth. The market is still waiting for some dramatic changes to its business model.

    On immigration reform, almost everyone (Democrats and Republicans) believes some kind of reform is required. I think we will see something pass (what form and shape it will take is debatable).


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