Infosys stock dives after another profit miss and lowered full-year revenue outlook

By Tomi Kilgore

Clients are stopping or slowing work on transformation programs, CEO Salil Parekh said

The U.S.-listed shares of Infosys Ltd. sank Thursday, after the India-based information-technology consultant missed profit expectations for a second-straight quarter, and cut its full-year revenue growth outlook.

The company (500209.BY) said it launched a "margin expansion" program, aimed at boosting its generative artificial intelligence (AI) and automation businesses and cutting indirect costs.

Chief Executive Salil Parekh said on the post-earnings conference call with analysts that he feels "confident" about the longer-term outlook, given a strong pipeline of large deals as the company's Generative AI platform is resonating well with clients.

"In the short-term, we see some clients stopping or slowing down work on transformation programs and discretionary work," Parekh said, according to a FactSet transcript.

Net income for the fiscal first quarter to June 30 rose to $724 million, or 17 cents a share, from $689 million, or 16 cents a share, in the year-ago period. That missed the FactSet to miss the FactSet consensus for earnings per share of 18 cents.

Revenue grew 3.9% to $4.62 billion, which was above the FactSet consensus of $4.59 billion.

The stock sank 9.1% in afternoon trading. That put it on track for the biggest one-day selloff since April 13, when it tumbled 9.8% after the company missed profit and revenue expectations.

For fiscal 2024, the company said it now expects revenue growth of 1.0% to 3.5% in constant currency, compared with previous growth guidance of 4% to 7%.

"This is due to lower than expected volumes due to ramp downs in discretionary spends coupled with lower megadeal volumes arising from delayed signing and longer ramp up time due to regulatory approvals and transitions," said Chief Financial Officer Nilanjan Roy said on the post-earnings call.

In the call after the disappointing fiscal fourth-quarter report in April, CEO Parekh had said that while the environment remained uncertain, there were "some signs of stabilization in March."

But has Susquehanna analyst James Friedman wrote in a note to clients on Thursday, "it sounds like the June quarter started slow and never improved."

Friedman reiterated his negative rating on the stock and $13 stock price target, which implies about 19% downside from current levels.

The stock has gained 8.5% over the past three months, while the iShares MSCI India exchange-traded fund (INDA) has rallied 12.0% and the S&P 500 has advanced 10.2%.

-Tomi Kilgore

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07-20-23 1359ET

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