Infosys' Q2 in Line With Expectations as Cloud Revenue Surpasses $1 Billion; Shares Fairly Valued

Infosys’ second-quarter results were right in line with our expectations while guidance was mixed, with revenue expectations higher and operating margins lower. Infosys was the last of the big three Indian IT services companies to report earnings, falling in between Wipro’s miss and Tata Consultancy Services’ beat against our former expectations. Although Wipro had the weakest results of the three, we believe its shares are still the most attractive, in 4-star territory. We are maintaining our $17 fair value estimate for narrow-moat Infosys and think the share are fairly valued. We continue to believe that Infosys’ switching costs remain high and stable despite the uncertain macroeconomic environment.