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Arusha Ray made post

Why has the Infosys stock rallied so sharply after the results? What was so good about the Infosys Jun-20 quarter results?

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Mary Joseph answered.
3 weeks ago

In a nutshell, Infosys is closing in on the operating margin gap with TCS. Let us look at revenues first. Total Revenues at Rs.23,665 cr were up by 8.50% on a YOY basis. At the same time, Net Profits at Rs.4,272 cr were up by 12.50%. Infosys also reported a 40% spurt in cash flow from operations at Rs.5670 crore and 50% spurt in net cash flows.

For the Jun-20 quarter, the Operating Profit Margins were 150 bps higher on a YOY basis at 22.7%, while the Net profit margins were also 70 bps higher at 18.1%. Now the OPM is just 100 bps shy of TCS. These results should help them close the valuation gap. The expansion in OPM was led by cost optimization and better resource deployment.

Free cash flows of Infosys improved 50% on a YOY basis due to aggressive collection policies adopted. What also worked for Infosys was that it announced large deals worth $1.75 billion during the quarter. Infosys also reported 44% growth in digital revenues consisting of cloud, mobility, analytics and AI/ML. Infosys guided of 0-2% growth in top line for next year.