Here’s how Infosys and TCS earnings performance in Q2 2020 stack up against each other
- Any lead that Tata Consultancy Services (TCS) had gained over Infosys has nearly been erased.
- Infosys outperformed TCS in Q2 2020 and it looking to boost the growing revenue from its digital services.
- TCS' digital business, on the other hand, is slowing down.
Valuation premium that TCS had gained over Infosys through the early part of 2019 has been nearly been erased, according to Nirmal Bang Institutional Equities.
Infosys expects bottom line growth from its digital sector where it feels it will be able to capture a higher premium from its clients.
"Digital pricing is a new area we are looking at — how we price digital service and command a premium from our clients," said CFO of Infosys, Nilanjan Roy, during the earnings call.
"Our digital margins are higher than our core business, that's something we already know. I think the way we repurpose our digital talent and looking at the scarcity, we think there's an opportunity of how to price this scarce talent — depending on skills, experience, what sort of clients they work with," he added.
TCS' digital business, on the other hand, has slowed down from being on track to cross 40% last quarter to a mere 28% at the end of September 2019. "We downgrade TCS to neutral and strike it off our list of conviction picks following 4% EPS (earnings per share) cut and a weak growth trajectory," according to analysts at HDFC Securities Institutional Research.
Here's a comparison of key metrics of the two tech giants in the three months between June and September 2019:
|Revenue growth in constant currency terms compared to last year||11.4%||8.4%|
|Full-year guidance||9-10%||Single digit growth|
|Deal wins||$2.8 billion||$1.16 billion|
|Digital services growth||38.4%||27.9%|
|Forex impact||(-)15 bps (June-Sep)||(-)260 bps (Apr-Sep)|
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