After a stellar set of numbers by Tata Consultancy Services, the similar performance is expected from Infosys. The Bengaluru-based IT major is all set to announce its third quarter numbers on Wednesday. Coming on the back of a quarter that saw strong deal closures, analysts expect Infosys to revise upwards its constant currency revenue guidance for FY21.
Nomura in its note dated January 4 expects the company to post a revenue growth of 3.4 per cent in dollar terms and around 3.1 per cent in constant currency terms for the third quarter largely led by a ramp-up in Vanguard which the company announced in (second quarter) July 2020, and revenues flowing in from its acquisition including Kaleidoscope, GuideVision and BlueAcorn iCi.
"We expect EBIT margins to fall 80bp q-q to 24.5 per cent due to transition cost from the Vanguard deal, cost reversals from the prior quarter and integration of three acquisitions in the quarter," the note says. "We expect Infosys to raise FY21F CC revenue growth guidance to 2.5-3.5 per cent (vs 2-3 per cent earlier), which implies a 1.5 per cent q-q CC growth in Q4 to reach the top end of the guidance range and expect to retain its EBIT margin guidance of 23-24 per cent for FY21F."
Similarly, Edelweiss Research in its report dated January 4 expects the company to post a sequential dollar revenue growth of 5.4 per cent, playing on its strengths in core transformation and on account of higher cloud and digital adoption, and also gaining significant market share lost out by key players such as Capgemini and Cognizant.
"We believe the company would restate its FY21 guidance higher from 2-3 per cent earlier to 3-5 per cent in Q3FY21. We also expect Infosys to post modest margin expansion of about 50bps QoQ, enabled by strong volume growth and better cost control and efficient execution," the report said.
However, the key things to watch out for from the management commentary would be around the extent of total contract value signed and deal momentum and term and pricing of deals.
Infosys had announced salary increases and promotions across all levels effective January 1. The company is likely to indicate the extent of the hikes and its impact and clarity on return to normal appraisal cycle for the year FY22.
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