Indian IT services firm Infosys has reported a 7.8% rise in net profit to Rs 6,128 crore ($826 million) for the fourth quarter of 2022, as compared to the same period last year. However, the company’s growth and guidance have been a disappointment, as it expects to miss its revenue growth target for the next fiscal year.
Infosys, which is India’s second-largest IT services firm, said that its revenue for the quarter rose by 2.8% to Rs 26,311 crore ($3.5 billion), while its operating margin improved to 24.5%, up from 24.2% in the previous quarter. The company’s revenue growth was driven by strong demand for digital services, cloud computing, and automation solutions, as well as growth in its financial services and life sciences businesses.
However, Infosys’ growth and guidance have fallen short of market expectations, as the company warned that it expects its revenue to grow by 12% to 14% in constant currency terms in the next fiscal year, which is lower than the 14% to 16% target that it had set earlier. The company attributed this to the uncertainty caused by the Covid-19 pandemic and its impact on the global economy.
Infosys’ CEO Salil Parekh said in a statement, “We have delivered another quarter of strong growth and operating metrics in a seasonally weak quarter. However, given the Covid-19-related uncertainty, we have revised our revenue growth guidance for FY23 to 12% to 14% in constant currency terms.”
The company’s stock price fell by over 5% following the announcement, as investors expressed disappointment at the lower-than-expected revenue growth guidance.
Infosys’ results come amid a challenging period for the Indian IT services industry, which has been hit by the pandemic and rising competition from global players. The industry is also facing increasing pressure to upskill its workforce and adapt to new technologies such as cloud computing, artificial intelligence, and cybersecurity.
Infosys said that it is investing in these areas to stay competitive, and that it is also focusing on improving its digital capabilities and expanding its global presence. The company has also been working on improving its employee retention rates, which have been affected by rising attrition rates in the industry.
Infosys’ results were also impacted by a one-time gain of Rs 290 crore ($39 million) from the sale of a subsidiary. Excluding this gain, the company’s net profit growth would have been 4.2% YoY, which is lower than the market’s expectations.
Despite the lower-than-expected revenue growth guidance, some analysts remain positive about Infosys’ prospects, citing the company’s strong financial position, digital capabilities, and client base.
Sanchit Vir Gogia, founder and CEO of Greyhound Research, said, “Infosys continues to maintain its leadership position in the Indian IT services industry. The company has a strong financial position and a client base that is heavily invested in digital transformation. While the lower revenue growth guidance is disappointing, Infosys remains well-positioned to capture growth opportunities in the coming years.”
However, others are more cautious, citing the challenges facing the industry and Infosys’ need to stay competitive.
Madhavan Menon, CEO of Bengaluru-based consulting firm InsightzClub, said, “The IT services industry is facing significant challenges, including rising competition, a rapidly changing technological landscape, and the need to upskill its workforce. Infosys will need to stay focused on improving its digital capabilities and expanding its global presence to stay competitive in this environment.”
Infosys’ results also come at a time of increasing scrutiny of Indian IT services firms by regulators and governments around the world. The industry has faced allegations of visa fraud, discrimination against non-Indian workers, and other labor law violations.
Infosys has been at the forefront of responding to these allegations and defending its reputation. The company has introduced measures such as increasing the percentage of locally hired employees in the US and Britain, improving training for foreign staff, and expanding its commitment to corporate social responsibility initiatives.
