Infosys Ltd. cut its annual sales forecast, as companies delay discretionary technology spending amid fears of an economic slowdown.
(Bloomberg) — Infosys Ltd. cut its annual sales forecast, as companies delay discretionary technology spending amid fears of an economic slowdown.
Infosys, India’s second-largest software services exporter, said Thursday it expected revenue to grow between 1% to 3.5% in the year through March 2024, compared with the 4% to 7% growth it projected previously. Analysts on average expect 7% growth.
“In the short-term, we see some clients stopping, or slowing down transformation programs and discretionary work. This is especially so in financial services, in mortgages, asset management, investment banking and telecom,” Chief Executive Officer Salil Parekh said at a news conference. “We also see some impact in high-tech industry and in parts of retail.”
India’s more than $245 billion software services sector, led by Tata Consultancy Services Ltd. and Infosys, is struggling with a hazy growth outlook as a Covid-induced boom in outsourcing fades. Still, Bengaluru-based Infosys remains optimistic about its long-term prospects as companies adopt new technologies such as generative artificial intelligence.
The company is doing around 80 generative AI projects with clients and has trained 40,000 executives in the technology, Parekh said. He also expects revenue from some recent deal wins to come through toward the end of the financial year.
Infosys is the last among large technology companies in India to report earnings. Its shares have fallen 4% so far this year, trailing a broader Mumbai market that’s gained 11%.
Mumbai-based TCS cautioned last week that enterprise customers were delaying projects which weren’t critical to business.
India’s showpiece outsourcing industry began by offering cheap backoffice solutions to some of the world’s biggest corporations, giving rise to the term “Bangalored,” and became critical to businesses as it handled problems such as the Y2K bug for them. It is now banking on the rise of big data, AI and machine learning to drive business transformation deals and earn higher margins.
What Bloomberg Intelligence Says
“Infosys’s fiscal 1Q24 results will likely highlight a challenging IT-spending climate, with the potential for a larger-than-expected slowdown from TMT clients, akin to what Accenture reported on June 22.”
– Anurag Rana, senior analyst
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For the first fiscal quarter ending June, Infosys posted a net income of 59.45 billion rupees ($726 million), up 11% over the previous year. Analysts expected a profit of 62.45 billion rupees. Sales rose 10% to 379.33 billion rupees.
Infosys reported an operating margin of 20.8% for the quarter, compared with analysts’ estimate of 21.1%.
“Q1 operating margins were resilient in an uncertain macro environment on the back of our continued focus on cost optimization,” Chief Financial Officer Nilanjan Roy said in a statement.
(Updates With fresh CEO comment in third paragraph.)
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