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MOSL: TECHNOLOGY: Outlook more secular than 2Q uptick in revenue growth

Technology: Outlook more secular than 2Q uptick in revenue growth; Cognizant’s 2Q earnings rounded off the earnings report across tier-1 IT

 

• 2Q earnings have been consistent with the thesis of a gradually improving demand environment. This marked the third consecutive quarter of an improvement in aggregate CC organic growth to 7.3%, after having hit a bottom of 5.2% in 2QFY18.
• Growth, so far, has been courtesy a low base; however, better expectations across the board (including BFSI) and a scale-led Digital play should mark a sustained pick-up for now. A reflection of increased optimism in metrics would only raise hopes for striking double-digit growth sooner.
• The supporting INR/USD has ensured that the momentum reflected in the top line is not offset by profitability concerns. The impact of wage hikes, visa expenses and investments was abated by both INR depreciation and an improvement in operational efficiencies. Continued support from currency, combined with a relatively sanguine start to the year, lead to continued expectations of margin expansion for the year.
• Tier-I on aggregate saw USD revenue growth of 7.8% YoY, EBITDA growth of 15.6% YoY and PAT growth of 12.2% YoY. PAT was impacted by lower forex gain across the board.