Infosys Ltd said its June quarter results were affected by moderation in demand in some segments, particularly in discretionary contracts, but demand for generative artificial intelligence or AI contracts was strong.
The company'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 company even slashed its revenue growth outlook for the current financial year to 1-3.5% from 4-7% earlier.
“Clients are trying to maintain cost discipline and reducing what they consider discretionary," said CEO Salil Parekh, echoing similar downbeat commentary from the likes of Tata Consultancy Services Ltd.
Like TCS, Infosys too said it was seeing weakness in some sectors such as mortgage and financial services, telecom, investment banking and hi-tech.
AI TO THE RESCUE?
However, on a positive side, said Parekh, there was a lot of buzz around generative AI deployments.
Generative AI refers to the use of artificial intelligence to generate content, including answers to questions, new software, news and other content.
"AI is one of the major drivers with very good momentum," he said. "AI is going to transform all platforms and the pricing environment has been stable."
Like its peers, Infosys has been working on AI platforms and technologies for some years -- particularly for deployment in use-cases such as customer support chat-bots.
Parekh said there are 80 active client projects on AI right now, encompassing applications such as software development, new code enhancement, migration, maintenance, voice, video, and text.
"Topaz, our comprehensive AI offering, is resonating well with clients. We see generative AI capabilities being transformative for clients and enhancing our overall service portfolio," he said, adding that the company has trained 40,000 employees in these platforms.
The company said that it is working on both open-source generative AI platforms and proprietary Generative AI platforms and is training its employees in the same.
We have built some tools on the open-source GAI platform, that we use internally in areas where we do software development, in areas of services, new code development. We have rolled out AI assistance for employees' delivery work, sales work, and training, he added.
Earlier this week, the company announced that it has entered into an agreement with an existing client to provide AI and automation-led development, modernisation and maintenance services, where the spend would be USD 2 billion in the next five years.
FOCUS ON MARGINS
With growth likely to be hard to come by this year, the company will focus on keeping costs under control.
It said it has adopted a five-pronged strategy to lower operating costs. One of the ways the company will try to lower costs will be by making the employee pyramid more efficient, possibly by making the higher levels leaner.
It will also reduce costs by increasing automation, nd by what it called "improvements in critical portfolios". The two other strategies involve reducing indirect costs and "communicating and deriving value".
With the delay in signings and starting a deal, the company said its revenue was impacted largely but is positive as a large chunk of the projects is reserved in the backend of the year.
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.