Infosys Q1 results: Discretionary spending remains weak

MUMBAI: The key engines of Infosys’ 3.0 strategy – consulting and products – failed to fire up the company’s revenue growth in the first quarter, as the Bangalore-based IT firm struggles to gain from rising discretionary spending in the industry.

Consulting and package implementation’s contribution to revenue dropped marginally to 32.3%, from 32.5% in the prior quarter. The business contributed 33.6% to Infosys’ revenue in the same period last year.

Products, platforms and solutions – now a separate subsidiary – contributed 4.8% to revenue, down from 5.1% in the March quarter and 5.4% in the year-ago quarter.

“In terms of service lines, bread and butter services offerings led the growth - IMS, Application development, testing, while moderate growth in Consulting and decline in PPS indicates discretionary spending remains soft for Infosys,” Pratik Gandhi , analyst at IDBI Capital Markets, said in a note.

Weak discretionary spending remains a concern at Infosys, even as other companies like TCS have said they expect to see strong growth from discretionary spending.

“We think the demand for discretionary spending in the industry is looking up but whether Infosys will get its fair share remains to be seen,” Viju George, analyst with J.P.Morgan said in a note.