Infosys slashes FY24 revenue guidance to 1-3.5%, profit increases 11% YoY

India’s second-largest IT company Infosys slashed its revenue guidance for the fiscal to 1-3.5% from 4-7%, amid an increasingly challenging demand environment.

It reported a 11 percent increase YoY in its net profit to Rs 5,945 crore in the first quarter of the 2024 fiscal. Infosys, which posted its results on July 20, saw its profit miss market expectations.

Its consolidated revenue increased 10 percent YoY to Rs 37,933 crore, while its operating margin came in at 20.8 percent, down from last quarter’s 21 percent.

While the IT major slashed its FY24 revenue guidance to 1.0-3.5 percent, it maintained operating margin guidance at 20-22 percent.

Operating margins declined by 20bps and came in at 20.8 percent.

For the quarter, its headcount also shrunk significantly by 6,940, its second consecutive decline in sequential terms.

Deal wins

The IT major, which only reports the total contract value (TCV) of its large deals, reported a TCV of $2.3 billion, which is up from last quarter’s $2.1 billion. This comes at a time when the company has announced two major deal wins — a MoU with BP for a $1.5 billion deal, and another with Danske Bank of $454 million. The IT major also announced this week that it has entered into an agreement with an existing client to provide AI and automation-led development, modernisation and maintenance services, where the spend would be $2 billion over five years.

“We had a solid Q1 with a growth of 4.2% and large deals of $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. Topaz, our comprehensive AI offering, is resonating well with clients. We see this being transformative for clients and enhancing our overall service portfolio” said Salil Parekh, CEO and MD, in a statement.

The company is working on 80 generative AI projects for clients, and has trained 40,000 employees on the technology.

Parekh said during the press conference that the company is seeing clients either stopping or slowing down transformation programs and discretionary programs, particularly in financial services, mortgages, hi-tech, telecom, and retail. He added that deal signings and start dates have been delayed, and a lot of the revenue from the larger and mega deals will be seen only towards the later part of the financial year. A combination of both is why, Parekh said, the company slashed its revenue guidance for the year.

The company has also deferred pay hikes, as Moneycontrol reported earlier. While Chief Financial Officer Nilanjan Roy said it is being considered, no timeline was given on the same. The company typically rolls out salary hikes to most employees in April, and to senior management in July.