Infosys reels under pressure as stock down 4.5% after surprise guidance cut

Shares of Infosys opened 4.5 percent lower in early trade on October 13 as a surprise cut in the company's growth guidance, the second in a row despite a resilient performance in the September quarter soured investor sentiment.

At 09.16 am, shares of Infosys were trading 2.9 percent lower at Rs 1,422.80 on the NSE.

Dragged by the dented sentiment, the New York Stock Exchange-listed American Depository Receipts (ADRs) of the information technology major also recorded a sharp slump. The ADRs of Infosys dived 6.5 percent to settle at $16.46 on October 12 following the release of the July-September earnings and a weak growth outlook.

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Infosys has cut its full-year revenue growth guidance at the upper end, now forecasting growth in the range of 1-2.5 percent. The cut in growth guidance was an unexpected whammy for the Street as the IT major had already reduced its growth guidance significantly in the previous quarter, pulling it down to  1-3.5 percent, down from the initial 4-7 percent forecast.

Moreover, the company also reported a good set of earnings for the July-September period, making the decision to slash growth guidance a harder pill to digest for investors.

Foreign brokerage firm Bernstein also expected the stock to react negatively to the guidance cut.

Despite that, the firm highlighted Infosys' sharp revenue beat and modestly better-than-expected margin for the quarter gone by. The company also posted a record large deal value of $7.7 billion in Q2, which is 2.5 times more than that seen in the previous quarter. Meanwhile, a weaker rupee and foregoing of salary hikes so far also helped the company record a 40 basis point sequential rise in its EBIT margin for Q2.

The company had delayed wage hikes in Q2 in a bid to aid its profitability and will now roll it out from November 1.

Also Read | Infosys reports 3% YoY rise in net profit in Q2FY24, narrows revenue guidance at upper end

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