Shares of Infosys rose 5% to Rs 1,487.70 in intraday trading on the BSE on Friday after the IT specialist posted a better-than-expected 11% year-on-year rise in consolidated net profit to Rs 6,021 crore. September quarter and announced a share buyback worth Rs 9,300 crore.

“Infosys beat expectations in the second quarter of fiscal 2023 with revenue in line, but margins (up 140 bps to 21.5% QoQ) are surprised by lower subcontracting costs and drove earnings growth. While buybacks were in line with the top price was slightly higher than expected,” Jefferies’ Akshat Agarwal and Ankur Pant wrote in the earnings report. They maintained a “buy” rating on the stock with a target price of Rs 1,700 per share.

For FY23, India’s second-largest IT services company raised the lower end of its revenue guidance, leaving the upper end unchanged, i.e., revenue guidance changed from 14-16% in constant currency (CC) to 15-16%. On EBIT margin guidance, it lowered the cap, keeping the waist unchanged, from 21-23% to 21-22% in FY23. Despite global macro concerns, the upward revision to revenue guidance was driven by “strong bulk trade pipelines” and good demand momentum.

The Infosys board also declared an interim dividend of Rs 16.50 per share. The company said in a statement that the interim dividend payment is about Rs 6,940 crore. The company has set October 28 as the record date for the interim dividend and November 10 as the payout date.

In CC terms, the company’s revenue grew 4% sequentially and 18.8% yearly. Dollar revenue rose 2.5% QoQ to $4.555 billion, while rupee revenue rose 6% QoQ to Rs 36,538 crore.

“Infosys’ strong bulk TCV sales prompted it to raise its FY23 revenue guidance. Based on our calculations, the company reports 5% CC growth over the next two quarters (assuming cross-currency headwinds of 100bps and 4% sequential dollar revenue growth) to achieve the 15% CC growth guidance for FY23, suggesting that seasonality may not be as severe as in the past,” ICICI Securities said in a note.

“It could also mean we are looking at continuing the strong bulk TCV momentum going forward. We don’t have the same margin confidence, probably because new hires are targeting higher. The moderation of LTM attrition is a positive trend; we think This is in line with their previous comment. Subcontractor costs are also slowing as it now accounts for 10.1% of sales compared to 11.3% in the previous quarter. However, net additions are on the soft side and need to be seen in the coming quarter’s recovery by the quarter to support strong growth,” the brokerage said.

Infosys posted strong earnings in the second quarter of fiscal 2023. Demand and orders remain strong. Motilal Oswal Financial Services said in its results update that its strong FY23 growth guidance and high headcount further increased visibility into demand. The brokerage expects Infosys’ margins to be at the lower end of its guidance range, with strong growth and less reliance on subcontractors as employee turnover declines.