Infosys on Thursday reported a lower-than-expected 11 per cent rise in net profit for the June quarter and delivered a shocker as it slashed its FY24 growth outlook to 1-3.5 per cent on delayed decision-making by clients amid global macro uncertainties.
The net profit came in at Rs 5,945 crore for the quarter ended June 2023 compared to Rs 5,362 crore in the year-ago period. The company posted revenue growth of 10 per cent to Rs 37,933 crore during the just-ended quarter.
The country’s second-largest IT services company — which competes with the likes of TCS, Wipro and others — drastically lowered its revenue guidance for the full year to 1 to 3.5 per cent in constant currency, down from 4 to 7 per cent it had projected earlier.
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The weak outlook and Q1 scorecard – which reflected microeconomic headwinds and delayed decision-making by clients – drove its US-listed shares down nearly 7 per cent in pre-market trading.
Seen sequentially, its net profit declined 3 per cent over the March quarter, while the revenue rose 1.31 per cent.
“We had good Q1 with large mega deals, but we have seen some of the deal signing and start dates being delayed,” Infosys CEO Salil Parekh said during an earnings briefing.
Accordingly, the revenue from these mega deals is expected to flow in the later part of the financial year.
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“In the short term, we see some clients stopping or slowing down transformation programmes and discretionary work, especially so in financial services, mortgages, asset management, investment banking and payments,” he said.
Through the quarter, Infosys saw volumes in specific industries being impacted, where clients reduced transformational projects and decision-making slowed.
“When we look at volumes of discretionary projects, we see some of them slowing down. We see good traction from generative AI and mega deals,” Parekh said.
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In the Q1 results statement, Parekh said that the company had clocked solid Q1 with large deals of USD 2.3 billion, “which helps us to set a strong foundation for future growth”.
“Our generative AI capabilities are expanding well, with 80 active client projects,” he said.
The company has expanded the margin improvement programme with a holistic set of actions for the short, medium and long-term, working on five key areas, supported by a leadership team.
On the company’s recruitment plans, Parekh said that while the company has targets for recruiting for the year, it will keep an eye on “changes in terms of the demand environment” and “attrition numbers”.
On promotions, the company management said that compensations are under active consideration.
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Large deal Total Contract Value (TCV) for the quarter was USD 2.3 billion.
The Bengaluru-headquartered company lost nearly 7,000 employees and its headcount was reduced to 3,36,294. Attrition (last twelve months) eased to 17.3 per cent from 20.9 per cent in the March quarter and 28.4 per cent in the year-ago period.
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Last week, TCS, HCL Tech, Wipro and LTIMindtree announced their first-quarter results.
LTIMindtree this week posted a 4.1 per cent year-on-year rise in its consolidated net profit to Rs 1,152.3 crore in the quarter ended June 30, although the numbers were a tad below market expectations.
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Wipro on July 13 posted a 12 per cent year-on-year rise in consolidated net profit at Rs 2,870 crore in the June quarter but missed analysts’ estimates as reduced discretionary spending by clients impacted its financial performance.
HCL Technologies reported a 7.6 per cent year-on-year rise in its June quarter net profit on the back of new order wins.
TCS registered a 16.83 per cent increase in its June quarter net profit to Rs 11,074 crore but sounded circumspect about growth prospects for the fiscal due to market uncertainties.