Infosys reports lower-than-expected Q4 profit, weak 4-7% revenue growth guidance

Infosys Ltd on Thursday reported lower-than-expected growth in fourth quarter net profit and gave a weak 4-7 per cent revenue growth guidance for FY24 amid tightening of IT budgets by clients following turmoil in US banking sector.

Infosys' latest report card was a disappointment on several fronts - company missed revenue guidance for FY23 hit by "unplanned project ramp downs and decision-making delays by some clients". With global macroeconomic uncertainties looming, it has given a subdued 4-7 per cent revenue growth forecast for FY24, with top management cautioning that " environment remains uncertain".

Infosys h last given single-digit revenue guidance in FY2019.

India's second-biggest software services firm posted 7.8 per cent year-on-year growth in consolidated net profit at Rs 6,128 crore in January-March quarter. But profit fell 7 per cent when compared to preceding October-December quarter.

revenue growth in constant currency for FY23 came in at 15.4 per cent, lower than guidance. Notably, during Q3 earnings announcement in January this year, Infosys -- which competes in market with Tata Consultancy Services (TCS), Wipro and or IT firms -- h raised FY23 revenue guidance to 16-16.5 per cent (against previously projected band of 15-16 per cent).

Infosys' Q4 year year-on-year-growth was 8.8 per cent and sequential decline was 3.2 per cent in constant currency terms.

Revenue rose 16 per cent year-on-year in fourth quarter of FY23 to Rs 37,441 crore but represented a decline of 2.3 per cent when compared to December 2022 quarter.

Infosys expects to post revenue growth of between 4 per cent and 7 per cent for current fiscal year ending March 2024, lower than analyst expectations.

Bengaluru-based company sees FY24 operating margin in range of 20-22 per cent.

conservative guidance comes on back of ongoing upheaval in US banking system and an uncertain global economy.

On Wednesday, country's largest IT services exporter TCS reported a 14.8 per cent increase in March quarter net profit at Rs 11,392 crore but flagged worries from its key market of North America.

Events like fall of SVB and fears of contagion have impacted client sentiments in North America and banking, financial services and insurance sector, in particular, leing to clients deferring spending, Tata Group company h said.

Infosys results came below street estimates, and its CEO Salil Parekh Parekh attributed Q4 show to a combination of unplanned project ramp-downs by some clients and delays in decision-making.

"In Q4, we saw changes in market environment. We saw unplanned project ramp-downs in some of our clients, and delays in decision making which resulted in lower volumes. In dition, we h some one-time revenue impact," Parekh said during earnings briefing.

"While we saw some signs of stabilisation in March environment remains uncertain." Parekh, however, asserted that Infosys' pipeline of large deals "is extremely strong".

"Several of m are mega deals, and several of m are opportunities, cost and efficiency programmes within clients, as well as consolidation opportunities," Infosys top honcho said.

board has recommended a final dividend of Rs 17.50 per equity share for financial year ending March 31, 2023.

For full year FY23, net profit was up 9 per cent year-on-year at Rs 24,095 crore, while revenue was 20.7 per cent higher at Rs 146,767 crore.

"In Q4, we saw some ramp down which were unplanned across different sectors, we saw some in telco, some in high tech, and retail. And within financial services, it was in mortgages, asset management and investment banking...in those industries, we saw constraints. In dition to that, we saw a one-time impact in quarter," Parekh explained.

Infosys' he count witnessed a net reduction of 3,611 employees in March 2023 quarter as compared to previous quarter, and total workforce strength slipped to 3,43,234 as of March 31, 2023.

Infosys' voluntary attrition -- a metric keenly watched by analysts -- showed improvement, easing worries. attrition rate stood at 20.9 per cent in Q4 FY23 against 24.3 per cent in Q3.

During briefing, Parekh also fielded questions on senior-level exits in company.

Infosys has seen two president-level exits in a matter of months, with Ravi Kumar and Mohit Joshi leaving company to join top-tier IT firms Cognizant and Tech Mahindra, respectively.

Parekh said company has announced and rolled out an internal structure focused on delivery, after Ravi Kumar's exit.

"We are in a position to now roll out a structure for financial services, as we move ahe. Within Infosys, we have a strong leership team so leers are coming from inside, and we see more and more at next level...leers within company will step up," Parekh said.