Infosys posted a disappointing set of numbers for the quarter, with the impact of the current stress on IT and challenging macroeconomic climate coming through in the company’s numbers -- missing not just estimates but also its own guidance on revenue growth for the year.
While the IT major had affirmed a revenue growth guidance in constant currency at 16-16.5 percent at the end of last quarter, it posted a full-year revenue growth of 15.4 percent. Sequentially, revenue for the quarter declined 2.2 percent in reported terms, and fell 3.2 percent in constant currency terms, coming in at $4,554 million.
Infosys also had a one-time impact on revenue, according to the leadership. “During the quarter we saw unplanned project rampdowns in some of our clients and delays in decision making which resulted in lower volumes. In addition, we had some one-time revenue impact,” Chief Executive Officer Salil Parekh said.
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This one-time impact on revenue, Chief Financial Officer Nilanjan Roy said, was due to volume, but was also “a combination of cancellations and specific client issues”.
The company’s EBIT margins came in at 21 percent for the year, at the lower end of its guidance for the year of 21-22 percent. For the quarter too, it contracted from last quarter’s 21.5 percent.
The company’s guidance going forward too, for FY24, has been below what was estimated. It has guided for 4-7 percent revenue growth for the year, and operating margin guidance came in at 20-22 percent.
The last time the company's revenue was in this guided range was in FY18, when it posted a revenue growth of 5.8 percent.
Parekh said that the company had some unplanned project rampdowns in some clients, as well as delays in decision making which resulted in lower volumes.
“Some of the clients that decided to slow down or stop some of the projects. These were things we had not seen at the start or end of last quarter. And that's what we felt. We've also seen some of that stabilizing in March, but the demand environment is uncertain. We are making sure that we keep that in mind as we look ahead and remain agile as we look ahead,” Parekh told the press.
He told Moneycontrol that while there is a large deal pipeline, there is slowing down in the cycle of closing deals.
Asked on the numbers posted by the company, Parekh said, “In some places, we saw a one time impact with clients. Those were things we saw during the quarter. The demand or market environment changed and that is what caused us to have the outcome that we had in Q4.”
In verticals, Parekh called out softness in parts of hi-tech, retail, telecom as well as parts of financial services such as asset management, investment banking and mortgage.
Last quarter too, he had called softness in mortgage and investment banking along with telco, hi-tech and retail.
The fourth quarter is a seasonally weak quarter for Infosys.
The company’s large deal total contract value (TCV) stood at $3.3 billion in Q3, and declined to $2.1 in the fourth quarter. In the same time period last year, it had a TCV of $2.3 billion.
The company’s large deal TCV in FY22 stood at $9.5 billion for the full year, and increased marginally to $9.8 billion in FY23.
The banking crisis was expected to weigh on the results of IT companies. The first three months of the year was marked by the global banking contagion due to the collapse of various regional banks based in the United States such as the Silicon Valley Bank (SVB), Signature Bank, and Credit Suisse. This added to the IT industry's existing struggles with macro-economic challenges. In fact, a JP Morgan report had stated that TCS and Infosys have the highest SVB and US regional banking exposure.
TCS took a pessimistic tone when it announced results on April 12, with the quarter coming in weaker than expected, and that the company saw volatility in the banking system.
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