Infosys revenue growth to hit six-year low as client spending falls

April 17, 2023

By Sethuraman N R and Nishit Navin

BENGALURU (Reuters) – Infosys Ltd on Thursday forecast revenue growth would hit a six-year low this fiscal as India’s No.2 IT services exporter grapples with clients clamping down or deferring spending due to growing fears of a recession in many countries.

Infosys said it expects revenue to increase 4%-7%, on a constant currency basis, in the year ending March 2024, well below analysts’ expectations of 10.7%. The previous slowest growth was a 5.8% increase in fiscal 2018.

The company’s U.S.-listed shares sank as much as 9% on Thursday, to $15.53, their lowest since December 2020. Its India-listed shares closed down 2.7% ahead of the results, weighed down by a similarly disappointing quarterly report from larger rival Tata Consultancy Services on Wednesday.

Infosys does not have a “clear view” of the year and there was a “slowing cycle” in closing deals, Chief Executive Salil Parekh said at a media briefing. The uncertainty was highlighted by Infosys refraining from its usual start-of-the-year practice of setting a target for hiring freshers.

The warnings from India’s top two IT exporters highlight the travails for the sector, which earns more than 25% of its revenue from just the U.S. and European banking, financial, services and insurance (BFSI) sector.

For Infosys in particular, the forecast of a slowdown comes just three months after it raised its revenue forecast for fiscal 2023, citing a strong deal pipeline.

However, its revenue growth of 15.4% ultimately fell short of that forecast of 16%-16.5%.

Parekh said there were “unplanned rampdowns” in client projects in the January-March quarter, across a number of sectors, including financial services.

There were also “one-timers” such as project cancellations and “specific client issues,” finance chief, Nilanjan Roy, said.

Infosys said it won large deals worth $2.1 billion in the quarter, less than the $2.3 billion it won a year ago.

As a result, Infosys’s revenue increased a smaller-than-expected 16% to 374.41 billion rupees ($4.58 billion) in the quarter, while its profit of 61.28 billion rupees also missed analysts’ expectations, according to Refinitiv IBES.

The Bengaluru-based company’s operating margin fell to 21.1% in the quarter, and is expected to stay between 20% and 22% this fiscal year, it said. ($1 = 81.7560 Indian rupees)