India’s Infosys Q3 profit misses view, tightens FY rev forecast on weak demand

By Haripriya Suresh

BENGALURU (Reuters) -India’s Infosys tightened its full-year revenue forecast on Thursday after reporting its first year-on-year drop in quarterly profit in over four years and missing expectations on sluggish demand from clients.

The $245-billion information technology (IT) sector, which had gained immensely from a pandemic-induced digital services boom, has been struggling in recent quarters as clients cut spending on non-essential projects amid inflationary pressures and recession fears. Consolidated net profit for India’s No.2 IT services provider fell 7.3% to 61.06 billion rupees ($735.55 million) in the seasonally weak third quarter from a year earlier. Analysts, on average, expected a profit of 61.67 billion rupees, as per LSEG data.

This was the first year-on-year profit fall for Infosys since quarter-ending September 2019.

Infosys also revised its revenue growth forecast for a third consecutive quarter to 1.5%-2% on a constant currency basis for the full year from 1%-2.5% previously.

“As we get closer to full year, the visibility gives us a similar outcome compared to last quarter,” Chief Executive Officer Salil Parekh said in a press conference.

Clients were not showing any change in behavior while allocating budgets for IT projects, Parekh added.

Large deal signings for Infosys for the quarter were at $3.2 billion versus $3.3 billion a year earlier.

“The troubles faced by India-based IT companies are not just transient but are reflective of deeper market and economic shifts,” said Hansa Iyengar, senior principal analyst of London-based tech consulting firm Omdia.

Revenue in the third quarter edged up 1.3% to 388.21 billion rupees, topping the analysts’ average estimate of 387.13 billion rupees, as per LSEG data.

Operating margin was at 20.5%, down from last year’s 21.5%, largely due to wage hikes and furloughs. Infosys, however, retained its operating margin forecast for the full year at 20%-22%.

Meanwhile, chief executive of larger rival Tata Consultancy Services said on Thursday he does not predict a recovery in demand for its IT services in the next two quarters.

($1 = 83.0130 Indian rupees)

(Reporting by Haripriya Suresh, writing by Sethuraman NR; Editing by Eileen Soreng)