Infosys Technologies – A Done Company

Even though Silicon Valley companies like Google and Apple beat Analysts forecasts by Teens Margins, Infosys and other IT Services Company suffer as they fail to innovate and are often struck at the point of inflection.

Infosys reported a 2Q with revenue growth of ~10% qoq to $1496m (our exp: $1464b). Cross currency boosted reported growth by ~1%. Volume growth was 7.2% qoq while onsite pricing witnessed a improvement of ~2.5% qoq. Offshore pricing was down ~0.4% qoq. EBITDA margins expanded ~170bps qoq.

Headcount increased by 7,646 employees on a net basis. Management has raised full-year hiring guidance – now expecting to add ~40,000 employees in the year (against 36,000 earlier). Well the founders have laid a firm foundation to Trade Cheap Engineering Labor on a H1-B Visa.

Revenues expected to be ~$5.95-6b, which is +24-25% qoq (earlier 19-21% qoq) (b) EBITDA margins expected to decline ~120-130 bps. Infosys continues to deliver well – however, at ~22x FY12E EPS[FY11 EPS 122.5, FY 12 EPS 144] one can expect limited upside from the stock.