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Revenue outperformance vis-à-vis peers continues…. Infosys reported a healthy set of Q3FY21 numbers. Dollar revenues increased 5.3% QoQ vs. our estimate of 3.3% in constant currency terms. Once again in this quarter, the company has outperformed Tata Consultancy Service (TCS) in terms of revenue growth. Infosys also reported flat QoQ margins despite headwinds of large deal transition cost and higher sub con cost. In terms of guidance, the company has revised its FY21E revenues guidance upwards from 2-3% to 4.5-5% and operating margin guidance to 21-23% from 24-24.5%. Digital acceleration, large deal continue to be growth drivers We believe the technology sector will witness multi-year growth in coming years led by traction in digital technologies. Infosys is in a sweet spot to capture this growth considering the investment it has made in digital technologies. This, coupled with increase in outsourcing in the US and Europe, vendor consolidation opportunities, captive carve outs and cost take out deals will further boost its revenues. In addition, Infosys has executed well on large deal conversion and is expected to be a key driver of revenue growth in the long run. Hence, we expect the company to register 11.2% CAGR in dollar revenues over FY20-23E.
