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Considering the Infosys management's optimistic commentary through the past two months, as well as signs of a rise in demand, analysts are hopeful the company may raise its revenue estimate for this financial year.
At the beginning of the 2013-14, Infosys had estimated six-10 per cent growth in revenue.
"At the lower end of the guidance shared by Infosys, the company was expecting a decline in revenue for the second, third and fourth quarters. But there is no reason for us to believe the company would see a fall in revenue in the reporting quarter (July-September). So, we are hoping there would be a meaningful upward revision in Infosys's guidance," said a Mumbai-based analyst with a foreign brokerage.
Though the company's revenue estimate for this financial year was lower than industry body Nasscom's estimate of 11-14 per cent, it was welcomed by investors. On July 12, when the company maintained its estimate while announcing its earnings for the quarter ended June, the Infosys stock had risen 15 per cent to a three-month high.
Any rise in the estimate on October 11, when Infosys announces its earnings for the quarter ended September, may set an optimistic mood for the entire sector, analysts say.
"We expect Infosys to tighten its FY14 guidance by raising the lower end to nine per cent growth and marginally increasing the top end," Religare Capital said in a pre-earnings note.
Most analysts are hopeful for the September quarter, the company would record sequential growth of at least three per cent in revenue. "If we assume they see three per cent sequential growth this quarter, even if growth is as low as up to two per cent in the subsequent two quarters, Infosys's growth will be higher than its current guidance," said an analyst.
Though Credit Suisse expects Infosys to raise its FY14 estimate, the brokerage firm feels the company is yet to come out of uncertainties. "The company's order flows appear to have improved through the quarter (July-September); however, it has lost key personnel. The result and outlook could provide clarity on the sustainability of a revenue pick-up," it said in a note.
Analysts said in line with peers, Infosys was expected to announce positive news on the margins front for the quarter ended September. The sharp fall in the rupee in July-September has raised hopes Indian information technology companies would record healthy margins, owing to conversion gains.
But for Infosys, the upside on margins might be limited, as wage increases by the company announced during the quarter would weigh on it.
The Infosys management had indicated the wage increases might have a negative impact of up to 300 basis points on margins for the July-September quarter.
"The rupee depreciation, improvement in utilisation rate, higher offshoring, absence of H-1B visa costs and the Lodestone acquisition expenses that were there in the previous quarter would act as tailwinds (to margins)," Credit Suisse said.
For the quarter ended September, Religare Capital expects Infosys's margins to rise 70 basis points sequentially, while Credit Suisse expects these to remain flat.
For the quarter ended June, Infosys's operating margins stood at 23.5 per cent, the same as in the previous quarter.
