TCS' 'landmark quarter' vs Infosys' 'blockbuster quarter': Q2 earnings analysis in six charts

Software giants Tata Consultancy Services (TCS) and Infosys who have released their September-quarter earnings managed to post bottomline figures that were in-line with analysts' estimates.

The country's second-largest IT firm Infosys on Tuesday (16 October) posted a 10.3 percent rise (year-on-year) in its September quarter consolidated net profit at Rs 4,110 crore, helped by strong deal pipeline and traction in digital revenues.

Terming it a 'blockbuster quarter', the company said the demand outlook remains strong but retained its 6-8 percent revenue growth outlook for FY2018-19.

Reacting positively to the result announcement, shares of Infosys rose by nearly 4 percent on Wednesday. The scrip after a positive opening further gained 3.53 percent to Rs 721 on BSE.

In dollar terms, Infosys saw its net profits increase marginally to $581 million in the September quarter, while revenues at $2.92 billion marked a 7.1 percent year-on-year growth.

Infosys' digital revenues stood at $905 million, growing at 33.5 percent year-on-year. The segment accounted for 31 percent of the total revenues.

 TCS landmark quarter vs Infosys blockbuster quarter: Q2 earnings analysis in six charts

Representational image. Reuters

Infosys CEO and managing director Salil Parekh said in a statement, "We see a strong demand outlook backed by good fundamentals in the US, Continental Europe...this is a fairly comfortable outlook, both in demand and revenue".

He added that large deal wins at over $2 billion in the second quarter of the fiscal demonstrate "increased client relevance and also give us better growth visibility for the near-term".

"We will continue to make strategic investments in digital to leverage opportunities and at the same time, keep sharp focus on key operational efficiency parameters," Infosys CFO MD Ranganath said, and added that Infosys had seen "blockbuster financial and operational performance" in the just-ended quarter.

Meanwhile, IT bellwether Tata Consultancy Services (TCS) on 11 October reported a 22.6 percent (year-on-year) jump in consolidated net profit at Rs 7,901 crore in the September quarter, compared with a net profit of Rs 6,446 crore in the year-ago period.

The country's largest exporter said it is looking at ending the year with a double-digit growth after a gap of two years, on the back of what it termed as a "landmark quarter" for the firm.

"On a one-time departure from our typical stance, I want to share that we have the numbers on the board and the momentum to ensure that the double-digit trajectory continues for the rest of the year. The journey has been a reaffirmaton of TCS strategies... it has been a landmark quarter for us," TCS chief executive officer and managing director, Rajesh Gopinath, told reporters after result announcement.

"This enables us to strategically focus on the medium and long-term," he added while indicating that growth has been coming from areas where the company have been investing.

However, despite TCS' smart performance in Q2 the investors turned cautious and dumped its shares on very next day of its result announcement. The stock fell 3.1 percent to Rs 1,918.40 on BSE. The stock was the worst hit among the blue chips on both the key indices during that day. In fact, the bluechip scrip fell for the third consecutive session on Friday (12 October), plunging over 8 percent and wiping out Rs 64,578 crore from its market valuation to Rs 7.20 lakh crore on BSE.

Here are six charts that help decode the companies' performance:

On the rupee revenue front, both TCS and Infosys had reported record numbers at least in 18 quarters. While TCS clocked a revenue of Rs 36,854 crore in the September quarter, that of Infosys was Rs 20,609 crore revenue.

In case of TCS, the revenue growth of 7.6 percent (QoQ) in the September quarter was the highest in the past 16 quarters while Infosys' revenue growth of 7.7 percent (QoQ) was the highest in the past 12 quarters.

The Tata group's gem had a record Q2 net profit of Rs 7,901 crore at least in 18 quarters. At Rs 4,110 crore, Infosys' was the highest in the past three quarters.

While TCS' net profit growth of 7.6 percent (QoQ) was the highest in the past four quarters, Infosys net profit growth was 13.8 percent (QoQ) in the September quarter, the highest in the past three quarters.

While TCS' operating margin, an indicator of profitability, expanded 144 basis points year-on-year to 26.5 percent, in case of Infosys it remained steady at 23.7 percent sequentially and the company has retained its guidance of this metric at 22-24 percent for the full fiscal.

TCS claimed to have the best retention rates in the industry with IT services attrition rate staying unchanged sequentially at 10.9 percent. The firm also saw the highest net additions in terms of hiring in the last 12 quarters, adding 10,227 employees in the September quarter. Total employees strength at the end of Q2 stood at 411,102 on a consolidated basis. Infosys added 19,721 (gross) and 7,834 (net) people during the September quarter, taking the total headcount to 2,17,739. Infosys' attrition rate (annualised consolidated) fell to 22.2 percent in September quarter from 23 percent in June quarter.

(With inputs from agencies)

Updated Date: Oct 17, 2018 12:08:09 IST