Infosys Likely To Register Flat Revenue Growth In Q1: Analysts

Infosys revenue growth is expected to be flat in the first quarter (April-June) and it is likely to maintain its full year revenue growth of 7-9% when it announces the results on Friday.

Steady growth in the US and the UK — which together account for more than three-quarters of the revenues of India's second-largest software exporter — should help Infosys see its top line increase 2% to reach $2.1 billion, as per analysts’ estimates. However, operating margin may decline 200-250 basis points sequentially due to wage increases and rupee depreciation.

The company had reported 25.5% operating margin during the March 2014 quarter. "We expect top line increases 2.3% quarter-on-quarter (7.5% year-on-year) to $2.14 billion and EPS at $0.76, roughly in line with consensus," said analysts James E Friedman and Xin Joey Yang at Susquehanna International Group, a Philadelphia-based quantitative trading firm.

“For the first quarter, we expect the operating margin to drop 220 basis points quarter-on-quarter to 23% from last quarter, but roughly flat year-on-year. Seasonal wage hikes and rupee appreciation may offset the benefits of cost rationalisation and improved utilisation," the analysts wrote in a July 8 note to investors.

According to some experts, it will be important to see how Infosys manages the transition with the appointment of Vishal Sikka, its first non-founder chief executive, who takes over the incumbent SD Shibulal from August 1.

"Both BG Srinivas (one of the two presidents of Infosys who used to oversee most client-facing functions) and Prasad (Prasad Thrikutam, former head of strategic sales and alliances) were client-facing executives. What impact would this have and what is the company doing to retain talent as clients start taking note remains to be seen," said an analyst at a Mumbai-based brokerage.