Infosys's stock dives after another disappointing earnings report

By Tomi Kilgore

IT consultant tops revenue expectations as it sees highest large-deals value at $7.7 billion, but cuts the full-year outlook

Shares of Infosys Ltd. were hit hard Thursday after the India-based information-technology consulting company reported fiscal second-quarter revenue that topped expectations, but trimmed its full-year growth outlook.

"We continue to see the overall environment where digital transformation programs and discretionary spends are low and decision making is slow," said Chief Executive Salil Parekh in the post-earnings conference call with analysts, according to a FactSet transcript. "This is impacting our volumes."

The stock (INFY) dove 7.3% in morning trading, putting it on track for the worst one-day performance since it tumbled 8.4% on July 20 after disappointing first-quarter results.

Net income for the quarter to Sept. 30 came in at $751 million, or 18 cents a share, compared with $749 million, or 18 cents a share, in the year-ago period, to match the FactSet consensus of 18 cents a share.

Revenue grew 3.6% to $4.72 billion, above the FactSet consensus of $4.63 billion. The company said it had its highest large-deals value at $7.7 billion in the second quarter, spread across all verticals and geographies.

Within the company's business lines, Chief Financial Officer Nilanjan Roy said the outlook for financial services remains uncertain, given the slowdown in areas including mortgages, asset management, investment banking, cards and payment.

For the communications sector, Roy said challenges continued amid increasing operating expenditures, inflation risks, high interest rates and supply-demand imbalances. "Delays in decision making continue," he said.

Energy spending remains cautious due to the economic slowdown, he added, and utilities continue to be hurt by high interest rates.

Meanwhile, the manufacturing sector continued to show strong growth, and the retail sector has been resilient given the focus on cost and budget consolidation and infrastructure modernization.

For fiscal 2024, the company lowered its revenue-growth outlook, excluding currency effects, to 1%-2.5% from 1%-3.5%, but it kept the outlook for operating margin unchanged at 20%-22%.

The stock has tacked on 1.6% over the past three months, while the iShares MSCI India exchange-traded fund INDA has inched up 0.2% and the S&P 500 SPX has slipped 2.4%.

-Tomi Kilgore

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10-12-23 1022ET

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