Infosys to announce Q2 earnings on Tuesday; here's what to expect

Revenue

Analysts expect revenue to increase 3.2 percent sequentially to Rs 17,630 crore and dollar revenue to grow 3.3 percent to USD 2,738 million in the quarter ended September 2017.

Constant currency revenue growth is expected to be at 2.2 percent for the quarter against 2.7 percent in Q1.

Analysts expect absence of a seasonal pick-up, given the softness witnessed in BFS and retail segments.

Operating Performance

Earnings before interest and tax (EBIT) is seen falling to Rs 4,097 crore during the quarter, compared with Rs 4,111 crore in previous quarter and margin may shrink 50 basis points to 23.6 percent on sequential basis.

EBIT margin may decline due to wage hikes (70-80 bps impact) that partly offset by lower visa costs and cross currency tailwinds.

Operational efficiency levers have been squeezed materially over the last few quarters, analysts said. Q1 was affected by one-time write-offs of about Rs 71 crore.

Guidance

Brokerage houses Nomura and CIMB expect Infosys to cut FY18 constant currency revenue growth guidance to 5.5-7.5 percent from 6.5-8.5 percent earlier while Kotak and Antique Stock Broking expect the company to slash full year constant currency revenue growth guidance to 6-7 percent.

HDFC Securities also sees downside risk to constant currency revenue guidance for FY18 but EBIT margin guidance of 23-25 percent is likely to be maintained.

After Q1 earnings, Infosys retained its constant currency revenue guidance for FY18 at 6.5–8.5 percent and also maintained margin guidance band at 23–25 percent. Dollar revenue growth guidance increased 7.1–9.1 percent from 6.1-8.1 percent earlier and rupee revenue guidance upped to 3–5 percent from 2.5-4.5 percent earlier.

Key things to watch:-

>New strategy under Nandan Nilekani;
>Relationship with top 50 clients;
>Commentary on new CEO
>FY18 Guidance
>Pricing outlook and progress on automation, digital segments