Infosys Beats Estimates

Infosys (INFY - Analyst Report) has exceeded our revenue and earnings estimates for the first quarter of 2010. Total revenues went up by 1.6% year over year in the quarter, while earnings per share increased by 1.9% year over year. Infosys continues to win transformational deals, solution-based engagements and systems integration projects.

Clients are leveraging Infosys’ industry expertise on projects directed at gaining a competitive advantage. Infosys’ consulting services is also contributing to growth. Corporations are benefiting from Infosys’ engineering services, particularly its Product Lifecycle Management (PLM) expertise. Infosys continues to strengthen its position in the banking and capital markets sector.

In the first quarter, the company launched the Finacle direct banking solution -- a comprehensive solution that supports full-fledged branchless delivery of banking services through the Internet, mobile phones or land-lines. Infosys' BPO business continues to grow, owing to its ability to provide seamless customer support and deliver consistent value.

Infosys has managed to increase its number of clients for deal sizes -- ranging from $1 million to $30 million. Top client contribution to revenues has declined sequentially from the prior quarter, while the percentage of repeat business from existing clients has increased to 98.7% from 95.9% in the previous quarter. North America contributed to 64.7% of revenues while contributions from Europe, India and the rest of the world were 25%, 1% and 10%, respectively.

Application Development & Maintenance, Consulting, Infrastructure Management and Testing Services were top-revenue-contributing services in the first quarter. Insurance, Banking & Financial Services, Manufacturing, Telecom and Retail were the top verticals in the quarter.

Utilization of employee efforts has declined compared to the prior quarter. There has been a net reduction of 945 jobs for the first quarter. Attrition level has remained steady sequentially.

The company has guided to a 10% sequential increase in revenues for the second quarter of 2010, while earnings are projected to increase by 12%.

We maintain our Hold rating on INFY.