Updated from 9:44 a.m. EDT

Infosys

(INFY) - Get Report

continued to deliver upside to investors on Wednesday, reporting profit and revenue that surpassed analysts' projections for the company, and it revised its guidance higher.

Infosys stock recently added 16 cents to $49.66 in heavy volume.

"It was surprisingly strong results at the revenue and profitability levels," says Ashish Thadhani, who covers Indian IT firms for Gilford Securities. He does not own shares of the company and his firm does not do banking.

The strong revenue numbers can be attributed to the favorable market backdrop and Infosys' success in winning more strategic projects, he says. Infosys' telecom sector, its software package implementation practice and European region were all areas of strength.

Revenue for the quarter totaled $746 million, rising from $524 million in the same period in 2005. That figure plowed through the average analyst expectation of $711.7 million.

For its second quarter, the Indian IT services firm earned $199 million, or 35 cents a share, compared with $138 million, or 25 cents a share in the year-ago quarter. Analysts polled by Thomson First Call expected 32 cents a share.

The company added 45 new clients during the quarter.

Thadhani also noted that the company improved its operating margin, and bested his forecast, thanks to lower visa costs, rupee appreciation and scale benefits.

The company is planning to transfer 30 million shares from India to the U.S. to enhance trading liquidity in the U.S., Thadhani says.

Infosys hired 10,795 employees during the quarter. Employee attrition was 12.9%.

"The challenge will be to attract and retain the best people," says Kris Gopalakrishnan, Infosys COO says, as the company continues its rapid hiring spree. He said the company predicted that it would add 25,000 employees this year, and has revised that upward to 28,300.

"We predicted a certain growth rate and we've exceeded that, and we're revising our guidance going forward," he added.

Looking ahead to the current quarter, Infosys said it expects to make 37 cents a share on revenue between $790 million to $795 million. Analysts are forecasting an EPS of 35 cents on sales of $751.7 million.

For the fiscal year ending in March 2007, Infosys said it would earn $1.44 a share on sales between $3.03 billion and $3.04 billion, again, surpassing analysts' predictions of a $1.34 a share profit and revenue of $2.92 billion.

"You're seeing some near-term strength," Thadhani says.