Infosys Q4 Revenue Falls Short of Expectations Amid Cautious Client Spending

Challenges Persist for India's IT Sector as Infosys Grapples with Cautious Client Spending and Macroeconomic Uncertainties.

In a quarterly report that reflects the challenges facing India’s IT sector, Infosys, the country’s second-largest IT services provider, announced lower-than-expected revenue figures for the fourth quarter. The results, released on Thursday, April 18, come amidst a backdrop of cautious client spending and macroeconomic uncertainties.

Despite a 1.3 per cent rise in revenue to 379.23 billion rupees (approximately S$6.2 billion) for the January-to-March period, Infosys fell short of analysts’ expectations, which had pegged the figure at 386.24 billion rupees according to LSEG data.

For fiscal year 2025, Infosys forecasts a modest revenue growth between 1 per cent and 3 per cent in constant currency. This forecast reflects the broader struggles faced by India’s US$254 billion IT sector, which has been grappling with clients reducing spending on non-essential projects amidst inflationary pressures.

Infosys’ consolidated profit, however, provided a silver lining, rising by 30 per cent to 79.69 billion rupees for the quarter. Despite this, the company reported a decline in growth particularly within the financial services and retail verticals. CEO Salil Parekh remains optimistic, expressing expectations for an improved performance in the financial services sector in fiscal year 2025.

The North American market, Infosys’ largest, experienced a revenue decline of 2.1 per cent, adding to the challenges faced by the company. Operating margins for the quarter also contracted by 90 basis points year-on-year to 20.1 per cent. Looking ahead, Infosys anticipates its margins for fiscal year 2025 to range between 20 and 22 per cent.

Parekh highlighted the company’s success in securing large deals, with fourth-quarter signings totaling US$4.5 billion compared to US$2.1 billion a year earlier. However, he noted that while there has been traction in areas like cost efficiency and consolidation, the visibility of digital programs and discretionary work remains limited.

The macroeconomic environment, according to Parekh, presents a mixed outlook, indicating ongoing challenges for the industry. This sentiment resonates with recent remarks from Tata Consultancy Services, India’s top IT services provider, which also reported lower-than-expected fourth-quarter revenue, citing weak spending as an ongoing concern.

As Infosys and its peers navigate through these headwinds, the coming quarters will likely see a continued focus on efficiency, cost management, and securing large deals amidst a backdrop of economic uncertainty.

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