Infosys showed stronger momentum in dollar-denominated revenue than larger peer Tata Consultancy Services (TCS) for December quarter in reported as well as constant currency (CC) terms.The operating margin though fell significantly by 110 basis points to 22.6% following adjustments pertaining to fair values of Panaya and Skava, two divisions that Infosys is in process of selling.Despite better sales traction, investors waiting for company to report a better topline growth in current fiscal than TCS may have to wait.
Given slower growth in previous quarters when compared with TCS, Infosys would find it difficult to overtake latter in growth momentum for FY19.
TCS may therefore post a better full-year revenue growth for third consecutive fiscal in terms of reported currency rates.IT stocks may show greater volatility following turbulent currency markets.
While Infys upward revision in CC revenue guidance for FY19 to 8.5-9% growth from earlier estimate of 6-8% growth may cheer investors, it was only a matter of time given gradually rising year-on-year growth in revenue since June 2018 quarter.
The announcement of buyback at 800 per share and a special dividend of 4 for each share shows companys commitment towards meeting its capital allocation guidance.A continued traction in digital revenue reported by TCS and Infosys augurs well since it reflects readiness of countrys top tier software exporters to adapt quickly to changing client needs.
Both TCS and Infosys now earn nearly onethird of revenue from digital services.In short-term, IT stocks may show greater volatility following turbulent currency markets.
The long-term trend however looks promising.