Infosys Limited INFY shares set the stock market abuzz on Thursday, galloping 4% higher after the India-based IT consulting and outsourcing company unfurled a dazzling performance report for the third quarter of fiscal 2024. The company’s earnings of 18 cents per share outshone the Zacks Consensus Estimate, leaving investors starry-eyed. Although it missed the year-ago quarter’s earnings of 19 cents per share by a penny, the buoyant news sent ripples of excitement through the market.
Infosys’ fiscal third-quarter revenues remained steady at $4.66 billion, surging past the consensus mark of $4.58 billion and demonstrating the company’s resilience in a tough economic climate. In terms of constant currency (cc), the metric strutted down the runway with a modest 1% dip.
The company’s stunning third-quarter performance reflects the payoff from robust sales strategies and honed operational efficiencies achieved under the ongoing “Project Maximus” program, defying the trials posed by current market conditions.
Infosys stock has languished against the backdrop of the broader Zacks Computer and Technology sector in the past year. While INFY shares have mustered a meager 3.8% increase, the Computer and Technology sector has sprinted ahead, notching a 46.7% rally.
Infosys Limited Price, Consensus and EPS Surprise 
Infosys Limited price-consensus-eps-surprise-chart | Infosys Limited Quote
Earnings and Revenue
Across Europe and the Rest of the World, Infosys saw revenues ascend by 9.2% and 7.1%, respectively, on a reported basis year-over-year. However, North America and India regions experienced a downturn of 4.7% and 1.9%, respectively.
In terms of segments, revenues from Manufacturing soared by 12.5%, reaching $694.8 million, while Life Sciences revenues grew by 8.2% to $354.4 million. Retail sales also experienced a 2% growth, amounting to $680.8 million. Energy, Utilities, Resources & Services weren’t far behind, registering a 1.8% increase at $615.5 million. On the flip side, Financial Services took a 5.2% hit, dropping to $1.3 billion, and Communication witnessed a 7.3% decline, landing at $531.6 million. The Hi-Tech division’s sales also narrowed by 5% to $359.1 million.
In a display of its sturdy growth engine, Infosys added 88 clients in the fiscal third quarter, locking in multiple large contracts valued at $3.2 billion. Impressively, clients worth more than $100 million now tally up to 40, illustrating a significant uptick from the year-ago quarter’s 38, as well as an increase from the second-quarter fiscal 2024’s 39.
Financial Overview
Gross profits faced a 2.8% year-over-year decrease to $1.39 billion. The gross margin also saw a contraction of 90 basis points (bps), settling at 29.8%.
Meanwhile, the company’s operating income dwindled by 4.5% year over year to $956 million, with the operating margin sagging 100 bps to 20.5% year over year. Additionally, Infosys concluded the fiscal third quarter with consolidated cash and investments of $3.9 billion, slightly down from the $4.17 billion recorded at the end of the second quarter of fiscal 2024. Over the third quarter and the first nine months of fiscal 2024, the company generated free cash flow of $665 million and $2.03 billion, respectively.
Outlook and Stock Analysis
Infosys revised its fiscal 2024 revenue growth guidance to 1.5%-2% at cc from the previously projected 1%-2.5%. However, the company continues to estimate an operating margin in the 20-22% range for the full fiscal.
Rank and Industry Comparisons
Currently, Infosys carries a Zacks Rank #3 (Hold). For investors eyeing alternative prospects in the broad technology sector, strong contenders are Zoom Video Communications Inc. ZM, NVIDIA Corporation NVDA, and Salesforce, Inc. CRM. While Zoom boasts a Zacks Rank #1 (Strong Buy), NVIDIA and Salesforce each carry a Zacks Rank #2 (Buy). It’s worth peeking at the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Zoom’s fiscal 2024 earnings was adjusted upwards by 28 cents to $4.94 per share in the past 60 days, suggesting a 13% year-over-year growth. NVDA, on the other hand, saw the consensus mark for its fiscal 2024 earnings receive an upward revision by 2 cents to $12.31 per share over the past 30 days, indicating a whopping 269% increase from fiscal 2023. Meanwhile, Salesforce’s Zacks Consensus Estimate for fiscal 2024 earnings was raised by a penny to $8.20 per share in the past 30 days, pointing towards a 56.5% increase on a year-over-year basis.
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