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Infosys (INFY) Rides High on Renew New Program, Hikes View

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Infosys Limited (INFY - Free Report) managed to impress investors with first-quarter fiscal 2018 results, wherein its earnings beat estimates by 4.3%. Infosys’ Renew New strategy, strategic partnerships, new offerings are proving conductive to the company’s impressive performance, consequently stoking growth. We believe that the earnings momentum is likely to continue as it has plenty ofroom to run. Here’s discussing a few highlights.

Existing Business Scenario

Infosys recorded impressive revenue growth in the fiscal first quarter, driven by lucrative client wins along with impressive traction of new high growth services and software business. Moreover, the company’s Renew New Strategy is proving to be growth driver, helping in attracting more clients. During the reported quarter, the company added a total of two active clients.

In light of the strong momentum, Infosys hiked fiscal 2018 guidance. The company now forecasts revenue growth in the range of 7.1-9.1%, up from the earlier guided range of 6.1-8.1%.

The company has been diligently following its “Renew New” program, which includes restructuring of customer-centric functions, streamlining of sales function, unification of delivery systems as well asredesigning of other fee and oral processes. This program has helped the company reap multiple benefits, including renewal of traditional services, winning deals, introduction of services and improvement of employee engagement.

In recent times, the company has been strengthening core competencies by pursuing strategic acquisitions that enable it to leverage emerging technologies in a mutually beneficial and cost-competitive manner. In the past few quarters, it has entered into several strategic partnerships with other technology behemoths to boost digital, cloud, legacy modernization and automation business.

Further, innovation has become the keyword of Infosys’ business strategy, fostered by pursuing two avenues, namely, empowering every employee with Zero Distance Program and improving next-generation services with AiKiDo offerings (acronym for Artificial Intelligence, Knowledge-based IT and Design thinking). Innovative actions like ‘Zero Bench’ program that was devised by the company to eliminate the notion of “bench” in the IT service industry is also proving to be a major asset, bolstering itsinternal strength.

However, the company faces strong competition from various big and small sector players including the likes of Applied Materials, Inc. (AMAT - Free Report) , Arista Networks, Inc. (ANET - Free Report) and Apptio Inc. (APTI - Free Report) . Further, it seems that escalating costs, President Trump’s anti-immigration stance and on-site expansion are likely to affect performance.

Considering growth drivers and the risks that the company faces, we believe its focus on Renew New program, strong innovation, greater operational efficacy and robust revenue growth offer solid growth opportunities.

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