Infosys PAT rises 11% but misses estimates; sales outlook halved

Bengaluru | Mumbai: Infosys posted a nearly 11% increase in first-quarter net profit, but missed analyst estimates and slashed its revenue growth outlook for the fiscal year, blaming spending cuts and delays in decision-making by clients, especially in the key financial services domain.

India's second-largest software exporter projected its FY24 revenue to grow 1.0-3.5% in constant currency, or excluding exchange rate fluctuations, compared with the previous estimate of 4.0-7.0%, underlining the global macro challenges for the country's storied sector which is seeing tepid demand for outsourcing services. The latest growth projection is the lowest in over a decade, and the cut was termed "drastic" and a "shocker" by brokerage Jefferies.

The Bengaluru-based company that shed employees for the second straight quarter said it would hire only based on demand.


"In the short term, we see some clients stopping or slowing down transformation programmes and discretionary work," managing director Salil Parekh told reporters Thursday.

Infy may Trail TCS, HCL
Clients are also delaying the start of big projects, which is impacting revenue, he said. "And, with that, we see a lot of that revenue from that sort of large and mega deals towards the later part of the financial year."

Net profit for the April-June period rose to Rs 5,945 crore from Rs 5,360 crore a year earlier. Revenue increased 10% to Rs 37,933 crore, supported by growth in Europe and the domestic market. The Street expectations were for the net profit to grow 16.5% and revenue to expand 9.7%.

The company's American Depositary Receipts (ADRs) listed on the NYSE were trading over 9% lower at $15.3 by 11.30 pm IST on Thursday. Its ADRs have fallen by nearly 12% year-to-date. On the BSE, Infosys shares ended 1.7% lower at Rs 1,448.85 ahead of the results announcement.

"This (deal delays) is especially so in financial services in mortgages, asset management, investment banking and payments, and in telecom. We also see some impact in the hi-tech industry and in parts of retail," said Parekh, also the chief executive of the company. On a sequential basis, net profit fell 3%, hurt by higher selling and marketing expenses, while revenue rose 1.3%. Infosys's revenue outlook cut was "drastic" and a "shocker", said Jefferies. The fall in employee count pointed to limited growth visibility in the near term, it said.

"Infosys has once again surprised negatively with a steep downgrade on revenue guidance," said Sanjeev Hota, head of research at Sharekhan by BNP Paribas. The projection, he said, "is much below our expectation of 4-6%". The company is likely to lag against rivals TCS and HCLTech in FY24, Hota said.

The company has expanded a "margin improvement programme" with a set of actions, the first of which is automation through generative AI, CFO Nilanjan Roy said at the briefing.