VanGuard deal will be the highlight of Infosys' second-quarter earnings as investors look for a hike in guidance
Oct 13, 2020, 17:59 IST
- Infosys will announce its second-quarter earnings tomorrow.
- Investors hope that the company will increase its annual guidance from 0-2% after racking up the VanGuard deal and nine others over the last three months.
- Deal wins also bring the spotlight on hiring and attrition for Infosys.
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Infosys' biggest deal to date, valued at more than a whopping $1.5 billion, with VanGuard will be the highlight of its second quarter. And, investors are waiting with bated breath for the company to raise annual guidance from 0-2%.Brokerages on Infosys | Annual growth guidance expectation |
Edelweiss Research | 2-4% |
Nomura | 1-3% |
The company’s second-quarter revenue is estimated to grow by as much as 3.3% sequentially, with the Vanguard deal accounting for as much as 1% of that growth, according to ICICI Direct Securities.
“The company is witnessing a healthy deal pipeline led by traction in the cloud, customer experience and in large deals, which involve cost takeout,” it said in its report.
Q2 Earnings Estimates
Brokerages on Infosys | Expected quarterly revenue growth (CC) | Expected change in margins |
ICICI Direct Research | 3.3% | 113 bps |
Edelweiss Research | 3.9% | 20 bps |
Nomura | 3.2% | -10bps |
Phillip Capital | 2.6% | 50 bps |
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This comes after Infosys announced that it had completed the $42 million acquisition of the US-based product design and development company Kaleidoscope Innovation on Monday, October 12.
Kaleidoscope’s capabilities will add to Infosys’ offerings in the healthcare space with medical devices across consumer and industrial markets in the US.
Infosys also announced another acquisition, a US-based analytics company called Blue Acorn iCi, for $121 million last week.
However, Infosys' growth trajectory is not only due to new deals. According to Edelweiss Research, the persistent market share loss of key players like Capgemini and Cognizant will also directly benefit the company.
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Infosys sweeps up new deals — and it’s about more than just revenue
The US-based Vanguard Group has around $6.2 trillion and other assets under management. It’s also the second largest provider of mutual funds and ETF in the world.
Infosys beat its other IT services peers — Tata Consultancy Services (TCS), Accenture, and Wipro — to win the multi-year deal that puts it in charge of Vanguard’s direct contribution recordkeeping business.
It will also mean new hiring across the board. Infosys can kick things off with around 300 to 400 employees but will eventually need to expand that base multifold to accommodate the requirements of the project. Around 1,300 employees will be transitioned over to Infosys at the same salary and comparable benefits, according to the company during the last earnings call.
At a time when Infosys is going to need to build up its workforce, its levels of attrition will be key to watch, according to Edelweiss Research.
Analysts estimate Infosys’ ‘digital transformation’ project for Vanguard, with an impetus on cloud and artificial intelligence (AI), could last as long as ten years and balloon the contract’s value to $2 billion.
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Infosys also has a couple of other notable wins in the bag, like the French Tennis Federation, Con Edison, and the National Bank of Bahrain.
Here’s a full list of deals that Infosys announced over the last three months:
Client | Deal description | Vertical |
Old National Bank | Infrastructure modernisation | BFSI |
Vanguard | Digital transformation and BPO | BFSI |
Lanxess | Information management system (IMS) | Manufacturing |
Con Edison | BPO | Utilities |
National Bank of Bahrain | Finacle | BFSI |
Genesys | BPO | Technology |
Essential Utilities | Enterprise solutions | Utilities |
Prabhu Bank | Finacle Core Banking Solution | BFSI |
WANdisco | Cloud migration | Technology |
French Tennis Federation | Digital transformation | Media |
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