Infosys has recently revealed its Q2 FY24 results, surprising investors with mixed outcomes. The company has posted a notable rise in profit, but at the same time, revised its revenue guidance, triggering a sharp selloff of its ADRs on the New York Stock Exchange (NYSE).
Profit Growth in Q2 FY24
Despite market challenges, Infosys demonstrated strong growth in net profits. The IT giant reported a consolidated net profit of ₹6,212 crores, marking a 3.2% year-over-year increase. Comparatively, the net profit for the same quarter in the previous year stood at ₹6,021 crores, with a sequential growth rate of 4.5%. This impressive performance is also reflected in the company’s revenue, which grew to ₹38,994 crores from ₹36,538 crores in Q2 FY23—a 6.7% year-on-year growth. This performance reflects Infosys’ robust operational efficiency, helping it maintain its operating margin guidance at 20-22%.
ADR Decline Following Weak Guidance
However, alongside these strong profit numbers, Infosys shocked the market by slashing its revenue growth forecast for FY24. Previously, the company had forecasted revenue growth between 1% to 3.5%, but this has now been revised downward to just 1% to 2.5%. This sudden shift led to a significant drop in Infosys’ ADRs, which fell by 7.18%, closing at $16.34 on the NYSE. On the National Stock Exchange of India (NSE), the company’s stock price dropped by 2.82%, closing at ₹1,452.3.
One of the key factors leading to this revenue guidance revision is the sluggish pace of digital transformation deals, delays in contract ramp-ups, and a slowdown in discretionary spending from major clients. CEO Salil Parekh addressed these concerns during a press conference, emphasizing the company’s strong pipeline of deals but also acknowledging the delays affecting revenue projections.
Challenges Facing Infosys
Infosys faces mounting challenges in the face of these adjustments. Apart from delayed client projects, the company is dealing with a slowdown in decision-making from major clients, which has caused delays in project ramp-ups and completion. Moreover, the reduction in discretionary spending, especially in transformation programs, continues to weigh on revenue expectations.
Despite these concerns, Infosys remains optimistic about its future. The company has managed to secure several large contract wins, which are expected to support revenue growth in the medium to long term. However, the uncertainty surrounding the timeline of these deals has left investors on edge.
What Lies Ahead for Infosys?
As Infosys heads into the second half of FY24, the market will closely monitor its ability to deliver on its promises. The key to its success will likely lie in how quickly it can overcome the delays in client deals and ramp up its large-scale contracts. For now, investors remain cautious as they await further updates in the coming quarters.
Source: This article is based on information from Sensitrend and Moneycontrol.
Key Highlights
- Infosys posted a consolidated net profit of ₹6,212 crores in Q2 FY24, marking a 3.2% year-over-year increase.
- Infosys revised its FY24 revenue growth forecast to 1-2.5%, down from the previously estimated 1-3.5%.
- ADRs plummeted by 7.18% on the NYSE following the weak revenue guidance.
- Delays in contract ramp-ups and reduced client spending contributed to the revised guidance.
