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Information technology services industry

Infosys Posts Strong Q2 Earnings, Boosted by Outsourcing Demand and Operational Efficiency

Strategic Insights

— 1 min read

Infosys Technologies reported a 53 percent rise in second-quarter net profit, surpassing expectations and sending its shares to a record high. The Indian software exporter attributed the strong earnings to a combination of factors, including a 2.5 percent improvement in operating margin, which was driven by a reduction in visa costs, rupee depreciation, and economies of scale. Additionally, the company was able to increase prices to some of its customers, with an aggregate revenue-productivity improvement of 1.2 percent.

Key Takeaways:

  • Infosys posted a 53 percent rise in second-quarter net profit, exceeding expectations.
  • The company attributed the strong earnings to a 2.5 percent improvement in operating margin, driven by a reduction in visa costs, rupee depreciation, and economies of scale.
  • Infosys was able to increase prices to some of its customers, with an aggregate revenue-productivity improvement of 1.2 percent.
  • The company added over 10,000 people on a gross basis and 7,741 on a net basis during the quarter.
  • Infosys CEO Nandan Nilekani emphasized that the company's growth is driven by its ability to maintain margins despite increasing competition from multinational companies.
  • The company is seeing growth across many sectors, including banking, capital markets, telecommunications, retailing, insurance, and energy and utilities.
  • European revenue has grown from 9 percent of Infosys' revenue seven years ago to over 25 percent today.
  • Nilekani expressed confidence in the U.S. economy, citing the advantage of offshoring and globalization of IT services.

Statistics:

  • 53 percent rise in second-quarter net profit
  • 2.5 percent improvement in operating margin
  • 1.2 percent aggregate revenue-productivity improvement
  • $3-4 million in visa cost savings
  • 50 basis points improvement from economy of scale
  • 90 basis points improvement from rupee depreciation
  • 10,000 people added on a gross basis
  • 7,741 people added on a net basis
  • 40 percent growth in dollar terms
  • 45-46 percent growth in rupee terms
  • 25 percent of revenue comes from Europe

Sources:

  • CNBC/DOW JONES BUSINESS VIDEO
  • VoXant, Inc. (www.voxant.com)

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