Company's revenue is expected to rise 12% in current fiscal year
Infosys Ltd, India's second-largest software exporter, raised its annual sales growth forecast for the second consecutive quarter as economic recovery prompts clients in Europe to spend more.
Revenue in dollar terms will increase by between 11.5 per cent and 12 per cent in the year ending March 31, Bangalore-based Infosys said in a statement on Friday. That compares with the company's October forecast for growth of 9 per cent to 10 per cent.
The software provider joins Accenture Plc in posting better-than-estimated earnings signaling outsourcing demand has gathered momentum as Europe recovers from its debt crisis and the US resolves budget negotiations. Worldwide spending on information technology is projected to grow 3.1 per cent to $3.8 trillion in 2014, with IT services set to increase 4.5 per cent, researcher Gartner forecast on January 6.
"The commentary from the company on the year-end outlook is a good sign for Infosys and the industry," said Harit Shah, an analyst with Mumbai-based Nirmal Bang Equities Ltd. "The improvement was the result of cost rationalisation, the firing of unproductive workers, off-shored a lot of work."
Shares of Infosys rose as much as 3.6 per cent before trading 2.8 per cent higher at Rs3,548.35 as of 12:36pm in Mumbai. The benchmark S&P BSE Sensex rose as much as 0.9 per cent.
The company also posted third-quarter earnings that beat analyst estimates as customers outsourced more information technology services to the company. Net income increased to Rs28.8 billion ($464 million) in the three months ended December, from Rs23.7 billion a year earlier, Infosys said on Friday. That exceeded the Rs27 billion median of 37 analysts' estimates compiled by Bloomberg.
Third-quarter sales climbed to Rs130.3 billion from Rs104.2 billion. That compares with Rs130.9 billion median of analysts' estimates.
"The year ahead looks exciting for the IT services industry," said S. D. Shibulal, chief executive officer and managing director. "We believe the global economic environment has improved and our clients are gaining confidence to invest in their strategic initiatives."
Co-founder N.R. Narayana Murthy returned as chairman in June with a mission to revive sales growth, has reshuffled top management after eight executives including the company's US head and a director quit last year. Immigration reform efforts in the US, the biggest market for Infosys, may continue to be a source of uncertainty, according to Anurag Rana, an analyst with Bloomberg Industries.
"We are all equally committed to making Infosys the aspirational company it once was," Murthy told investors on Friday. "We'll leave no stone unturned to achieve that."
Share of revenue from Europe is up to 24.9 per cent from 24 per cent a year earlier, Infosys said pn Friday. North American sales fell to 60 per cent of revenue from 61 per cent in December 2012, according to the statement.
"Infosys's potential to outperform its peers has strengthened in light of global recovery and Murthy's comeback," Daljeet Kohli, an analyst with India Nivesh Securities in Mumbai, said before the earnings announcement.