Net profit of Infosys missed estimates in the second quarter, while the company again trimmed revenue guidance for the fiscal, heightening concerns about the outlook for the sector this year.

Peer TCS also missed revenue and profit estimates for the quarter on Wednesday that led to the stock falling 1.88 per cent on Thursday.

Infosys, the country’s second largest IT services firm, posted a net profit of Rs 6,212 crore compared with Rs 6,021 crore in the year-ago period, an increase of 3.2 per cent. Analysts had expected net profit of around Rs 6,300 crore.

Adding to the sedate number, the company cut the revenue guidance for this fiscal.
This is the second consecutive quarter it has cut the guidance, reflecting the demanding environment which the sector is facing in terms of clients slowing down discretionary spending and focusing on cost optimisation.

Infosys now expects a 1-2.5 per cent revenue growth in constant currency terms.
In the preceding quarter, it had slashed the guidance to 1-3.5 per cent from the earlier projection of 4-7 per cent.

Revenues, however, beat estimates — they grew 6.7 per cent to Rs 38,994 crore from Rs 36,538 crore in the same period of the previous year against estimates of around Rs 38,500 crore.

Another positive surprise was the large deal TCV (total contract value) of $7.7 billion which is the highest ever.

Operating margin improved to 21.2 per cent from 20.8 per cent on a sequential basis.

Speaking after the results in Bangalore, Infosys CEO and managing director Salil Parekh said the company has pivoted from delivering transformational projects to providing productivity benefits and cost savings at scale.

“On guidance, we are seeing discretionary projects and large transformation programmes have reduced significantly, and we are seeing decision-making continues to be slow.

“As we have looked at this quarter, the volumes are still under constraint and keeping that in mind, we have given our guidance for the full year,” Parekh said.

The company is seeing project ramp-ups being pushed to the back end of the year, Parekh said.

“We continue to see a significant amount of market hesitancy resulting in delayed revenue. This is driven by uncertainty about the economic cycle and the increasing conviction that a recession is likely in 2024,” Peter Bendor-Samuel, chief executive at research firm Everest Group, told Reuters.