Infosys issued its lowest revenue growth guidance since the global financial crisis 15 years ago, slashing its top-line forecast to just 1.0-3.5% this year in the wake of a global slowdown in demand.
The company's previous estimates predicted a 4-7% revenue guidance in April, which was again a trimmed version of its earlier forecast of 16-16.2% growth this year. For comparison, the company's revenue had expanded by 15.4% in FY 2023, which was -- incidentally -- just below the company's own guidance for the year.
The sharp guidance cut comes at a time the company reported softer-than-expected profits during the April-June quarter on the back of global economic headwinds. The IT services major's revenue grew only by 1%, net of currency fluctuations, compared to the preceding quarter, while net profit fell 2.9% as operating expenses rose faster than the top line. The results missed analysts' expectations.
CEO and MD Salil Parekh said clients are trying to maintain cost discipline and reduce what they consider discretionary, resulting in the low FY2024 forecast.
Parekh flagged delayed decision-making as one of the factors contributing to the slowdown, "We had a good Q1 with large, mega deals, but we have seen some of the deal signing and start dates being delayed." The revenue from the mega deals will be balanced in the backend of the financial year, he added.
"We have disclosed information on large deals, and mega deals in the revenue guidance but will have to wait and watch the impact of the discretionary projects on revenue," Parekh said. The company classifies deals worth $50 mln and above as large ones, and those that can generate revenue of over $500 mln as mega deals.
Through the Apr-Jun quarter, the company witnessed volumes in specific industries being impacted where clients reduced transformational projects and decision-making slowed.
"The way a lot of the transformation programmes that are running today, they are funded based on cost efficiency. So overall, the decision-making sometimes is slowing down," he added.
"And we're seeing the start dates -- in terms of where some of these programmes are likely to start -- more towards the back end of the year, and that's the reason we're seeing the revenue impact through the year."
The company on a positive note mentioned that AI generative platforms well doing well and gaining 'good momentum'. However, it refused to give an exact percentage of AI-based deals the company has bagged.
Infosys Chief Financial Officer, Nilanjan Roy said that hikes and compensation are under consideration and new employment will be based on the demand environment. Employee attrition eased to 17.3 per cent from 20.9 per cent in the previous quarter.
The company added 99 clients during the April-June quarter whereas in the same quarter last year, it added 106 clients and in the last quarter (Q4FY23) it added 115 clients. Overall, it had 1,883 active clients as on June 30, 2023, up from 1,778 clients it had as on June 30, 2022, and 1,872 clients as on March 31, 2023.