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Infosys (INFY) Q3 Earnings and Revenues Match Estimates

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Infosys (INFY - Free Report) reported third-quarter fiscal 2023 earnings of 19 cents per share, which matched the Zacks Consensus Estimate. The company’s bottom line increased 3.4% on a year-over-year basis.

Infosys’ fiscal third-quarter revenues increased 9.6% year over year and met the Zacks Consensus Estimate of $4.66 billion. In terms of constant currency (cc), the metric was up 13.7%.

Infosys continued to fortify its industry-leading digital capabilities amid a highly volatile economic scenario. The company witnessed solid traction for its CobaltTM cloud portfolio and other diversified digital solutions throughout the quarter. Large deal wins and market share expansion, driven by the accelerated digital transformation trend worldwide, remained key catalysts for INFY’s growth.

Infosys Limited Price, Consensus and EPS Surprise Infosys Limited Price, Consensus and EPS Surprise

Infosys Limited price-consensus-eps-surprise-chart | Infosys Limited Quote

Top-Line Details

Digital revenues (62.9% of the total) climbed 17.8% year over year (21.7% at cc) to $2.93 billion. Meanwhile, Core revenues (37.1%) declined 1.9% (up 2.4% at cc) to $1.73 billion.

Revenues across North America, Europe and the Rest of the World regions recorded year-over-year increases of 10%, 13.6% and 3.9%, respectively, on a reported basis. On a cc basis, North America, Europe and the Rest of the World registered growth of 10.5%, 25.3% and 11.9%, respectively. However, revenues from India plunged 11.5% on a reported basis and 5.4% at cc.

Segment-wise, Manufacturing registered growth of 29.1%. Life Sciences, Financial Services, Communication and Retail jumped 3.1%, 2.2%, 7.9% and 8.3%, respectively. The Energy, Utilities, Resources & Services and Hi-Tech divisions recorded year-over-year revenues of 20.8% and 9.9%, respectively. Sales in the Others business segment witnessed a decline of 1.1%.

Infosys added 134 clients in the fiscal third quarter. It signed multiple large deals of contract values worth $3.3 billion. The company reported that its clients, worth more than $100 million, now add up to 38, up from the year-ago quarter’s 37 but down from the last reported quarter’s 39.

Other Financial Details

Gross profits increased 2.5% year over year to $1.43 billion. However, the gross margin contracted 210 basis points (bps) on a year-over-year basis to 30.7%.

The company’s operating income inched up 0.3% year over year to $1 billion. Meanwhile, the operating margin declined 200 bps to 21.5% year over year.

Infosys ended the fiscal third quarter with cash and cash equivalents of $1.4 billion, down from the $1.83 billion recorded at the end of the second quarter of fiscal 2023. In the fiscal third quarter, the company’s free cash flow was $576 million.

Raised FY23 Revenue Outlook

For fiscal 2023, INFY now expects annual revenues to grow between 16% and 16.5% year over year at cc compared with the previous estimate of 15-16% year over year at cc. However, the company reiterated its operating margin estimate of the 21-22% range for the full fiscal.

Zacks Rank & Key Picks

Currently, Infosys carries a Zacks Rank #3 (Hold). Shares of INFY have declined 29.8% over the past year.

Some better-ranked stocks from the broader technology sector are Paylocity Holding (PCTY - Free Report) , Zscaler (ZS - Free Report) and Nutanix (NTNX - Free Report) . Paylocity sports a Zacks Rank #1 (Strong Buy) at present, while Zscaler and Nutanix each carry a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Paylocity’s second-quarter fiscal 2023 earnings has remained unchanged at 70 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved up 3 cents to $4.05 per share in the past 60 days.

Paylocity's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 51.2%. Shares of PCTY have declined 2.3% in the trailing 12 months.

The Zacks Consensus Estimate for Zscaler's second-quarter fiscal 2023 earnings has been revised 3 cents upward to 29 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved up by a penny to $1.24 per share in the past 30 days.

ZS’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 27.3%. Shares of the company have declined 58.9% over the past year.

The Zacks Consensus Estimate for Nutanix's second-quarter fiscal 2023 earnings has been revised northward by 2 cents to 11 cents per share over the past 60 days. For fiscal 2023, earnings estimates have moved upward by 3 cents to 17 cents per share in the past 60 days.

Nutanix's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 86.1%. Shares of NTNX have slumped 7.8% in the trailing 12 months.

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