Infosys' (INFY +6.1%) FQ2 beat and in-line FY14 revenue guidance (9%-10% growth vs. 9.3% consensus) is providing a lift to IT outsourcing peers Cognizant (CTSH +5.4%), Wipro (WIT +4.2%), and Accenture (ACN +1.7%)
Cognizant and Wipro have made new 52-week highs. In July, both companies rallied in response to Infosys' FQ1 beat. All four companies sold off last month after Cognizant provided soft revenue and bookings guidance (more the result of consulting weakness rather than outsourcing)
Infosys' CC remarks could also be helping out the group. CEO S.D. Shibulal mentioned demand from financial services clients is picking up, retail/consumer products demand remains healthy, and European firms are showing greater interest in outsourcing across verticals. However, manufacturing spend is "relatively stagnant," and and the energy, utilities, and telecom verticals remain challenging.
15 cloud/big data-related deals were signed in FQ2. Cloud services represent both a growth opportunity for outsourcing firms, and (to the extent in-house projects are abandoned for public cloud services) a long-term threat.
The rupee's decline boosted Infosys' EBIT margin by 250 bps, but wage hikes took a 300 bps toll.