Infosys revises revenue guidance amid slowdown

We didn’t see any change in the macro environment in the third quarter. Infosys’ ability to win large deals remained strong as we won many deals comprising both cost optimisation and digital (ones). In many cases, we have been a beneficiary of vendor consolidation, which happened in the third quarter. Our guidance reflects our assessment of demand situation -- Salil Parekh, CEO & MD, Infosys

Sluggish Q3

• Infy reported a 7.3% YoY fall in net profit at Rs6,106 cr
• Revenue from operations rose by 1.3% to Rs38,821 cr
• It maintains its operating margin guidance at 20-22%
• No improvement in demand environment seen
• Strong large deal pipeline with consolidation at play

Bengaluru: IT major Infosys on Thursday reported a weak set of third quarter results with sequential fall in both revenue and margin though its deal wins remained robust. The company revised its revenue guidance for the ongoing financial year again by tweaking both upper and lower end of the band. It, however, maintained its operating margin guidance.

In the third quarter ended December, Infosys reported a 7.3 per cent year-on-year (YoY) fall in net profit at Rs6,106 crore. The Bengaluru-headquartered company’s revenue from operations rose by 1.3 per cent to Rs38,821 crore year-on-year basis in a traditionally weak quarter. In dollar term, revenue stood at $4.66 billion for the December quarter, a decline of 1 per cent in constant currency term.

The country’s second largest IT services provider tweaked its revenue guidance again for FY24. It has now guided for revenue growth of 1.5-2 per cent for the full year as compared to 1-2.5 per cent given in the previous quarter.

The company continued to maintain momentum in the large deal space as it won large deals worth $3.2 billion in the third quarter. Out of the total deal wins, 71 per cent of the contracts were net new in nature.

“We didn’t see any change in the macro environment in the third quarter. Infosys’ ability to win large deals remained strong as we won many deals comprising both cost optimisation and digital (ones). In many cases, we have been a beneficiary of vendor consolidation, which happened in the third quarter. Our guidance reflects our assessment of demand situation,” Salil Parekh, CEO & MD of Infosys, said in the post-results press conference.

He said while demand in financial services, telecom and hi-tech remained weak, it was strong in manufacturing, energy & utilities and healthcare verticals.

“There is strong interest among clients on generative AI space. Though it is yet to give big revenue numbers, such demand puts us in a good stead for coming quarters,” Parekh said.

The company maintained its operating margin guidance of 20-22 per cent for the whole financial year. In the third quarter, Infosys operating margin stood at 20.5 per cent, a fall of 70 basis points over the last quarter.

“Q3 performance is a demonstration of our strong execution capabilities reflected in improvedoperational efficiencies achieved under ‘Project Maximus’, despite a challenging environment”, said Nilanjan Roy, Chief Financial Officer at Infosys, said.

Among vertical, financial services saw a decline of 5.9 per cent year-on-year basis, while communication vertical reported a decline of 8 per cent as compared to previous year. Hi-tech declined 5.1 per cent during this period. However, manufacturing vertical reported a growth of 10.6 per cent, while life sciences grew 6.3 per cent in the third quarter.

Among geographies, Europe witnessed a growth of 5 per cent, while growth in North America fell by 4.9 per cent in the third quarter.

During December quarter, Infosys continued to see fall in its headcount. The overall headcount fell by 6,101 to 322,663 by the end of December quarter. Meanwhile attrition level fell to 12.9 per cent from 14.6 per cent in the previous quarter.

“We have the space for better employee utilization level. Therefore, we will add employees as per demand,” said Roy. The company also announced that it would acquire semiconductor design services, InSemi as demand in semiconductor space grows globally.