Infosys (INFY) Q2 Earnings Meet Estimates, Revenues Surpass
Infosys Limited INFY reported second-quarter fiscal 2024 earnings of 18 cents per share, in line with the Zacks Consensus Estimate as well as the year-ago quarter. The company’s fiscal second-quarter revenues increased 3.6% year over year to $4.72 billion, surpassing the Zacks Consensus Estimate of $4.55 billion. In terms of constant currency (cc), the metric was up 2.5%.
The company’s top-line performance was mainly driven by stronger growth in the balanced portfolio and better realizations from one-timers. However, slow decision-making processes, along with softness in digital transformation programs and discretionary spending in the current uncertain macroeconomic environment, are hurting the company’s volumes.
Shares of Infosys have underperformed the Zacks Computer and Technology sector in the year-to-date (YTD) period. While INFY stock has declined 8.6% YTD, the Computer and Technology sector has rallied 38.9%.
Infosys Limited Price, Consensus and EPS Surprise
Infosys Limited price-consensus-eps-surprise-chart | Infosys Limited Quote
Top-Line Details
Revenues across North America, Europe, India and the Rest of the World recorded a year-over-year increase of 1.2%, 10.9%, 0.4% and 1.2%, respectively, on a reported basis. On a cc basis, North America, Europe, India and the Rest of the World registered growth of 1%, 5.4%, 2.6% and 3.9%, respectively.
Segment-wise, revenues from Manufacturing increased 15.9% to $676 million, Life Sciences revenues grew 20.7% to $369 million, and Energy, Utilities, Resources & Services sales climbed 6.7% to $598 million. Our estimates for Manufacturing, Life Sciences, and Energy, Utilities, Resources & Services unit sales were pegged at $592.7 million, $306.6 million and $575.1 million, respectively.
In the second quarter of fiscal 2024, the company’s Retail segment revenues grew 10.7% to $716 million, while the Others business unit’s revenues increased 12.8% to $155 million. Per our estimates, the Retail and Others segments were likely to report revenues of $636 million and $141.5 million, respectively, in the quarter.
However, Financial Services fell 6.8% to $1.3 billion in comparison to our estimates of $1.29 billion, and Communication declined 3.8% to $540 million in comparison to our estimates of $539.7 million. The Hi-Tech division’s sales inched down 0.4% to $369 million. According to our estimates, Infosys’ revenues from the Hi-Tech division were pegged at $363.5 million in the reported quarter.
Infosys added 100 clients in the fiscal second quarter. It signed multiple large deals of contract values worth $7.7 billion, the highest ever in any quarter. The company reported that its clients, worth more than $100 million, now add up to 39 and were in line with the year-ago quarter but up from the first-quarter fiscal 2024’s 38.
Other Financial Details
Gross profits increased 4.5% year over year to $1.45 billion. The gross margin expanded 30 basis points (bps) on a year-over-year basis to 30.7%.
The company’s operating income increased 2.2% year over year to $1 billion. Meanwhile, the operating margin contracted 30 bps to 21.2% year over year.
Infosys ended the fiscal second quarter with consolidated cash and investments of $4.17 billion, up from the $3.59 billion recorded at the end of the first quarter of fiscal 2024. During the second quarter and the first half of fiscal 2024, the company generated free cash flow of $670 million and $1.37 billion, respectively.
Updated FY24 Outlook
Considering the headwinds from slow decision-making and softness in digital transformation programs and discretionary spending, Infosys trimmed its fiscal 2024 revenue growth guidance to 1%-2.5% at cc from 1%-3.5% projected earlier. However, the company continues to estimate an operating margin in the 20-22% range for the full fiscal.
Zacks Rank & Stocks to Consider
Currently, Infosys carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the broader technology sector are NVIDIA NVDA, Palo Alto Networks PANW and Paylocity Holding PCTY. NVIDIA and Palo Alto each sport a Zacks Rank #1 (Strong Buy), while Paylocity carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for NVIDIA's third-quarter fiscal 2024 earnings has been revised upward by 2 cents to $3.34 per share in the past 30 days. For fiscal 2024, earnings estimates have increased by 7 cents to $10.74 per share in the past 30 days.
NVIDIA’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing on one occasion, the average surprise being 9.8%. Shares of NVDA have surged 220.8% YTD.
The Zacks Consensus Estimate for Palo Alto Networks' first-quarter fiscal 2024 earnings has been revised upward by 6 cents to $1.16 per share in the past 60 days. For fiscal 2024, earnings estimates have increased by 39 cents to $5.34 per share in the past 60 days.
Palo Alto Networks’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 22.2%. Shares of PANW have surged 86.8% YTD.
The Zacks Consensus Estimate for Paylocity’s first-quarter fiscal 2024 earnings has remained unchanged at $1.07 per share in the past 60 days. For fiscal 2024, earnings estimates have moved 5 cents upward to $5.58 per share in the past 60 days.
Paylocity’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 39.7%. Shares of PCTY have risen 1.4% YTD.
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