The net profit and operating margins of Infosys for the three months ended June 30, 2022 have fallen short of estimates.

But the country’s second-largest IT services firm raised the revenue guidance for the fiscal as it remained optimistic about the demand environment and the product pipeline despite talks of recession affecting certain sectors such as mortgage in financial services.

The Bangalore-based firm reported a net profit of Rs 5,360 crore for the quarter ended June 30, 2022 — a growth of 3.2 per cent over Rs 5,195 crore in the same period of the previous year.

Analysts had expected Infosys to report net profits in the region of Rs 5,700 crore.

Though its revenues in rupee terms was in line with expectations, there was a disappointment on the operating margins and large deal wins front.

Though Infosys is among the first to declare its financial results in a quarter, this time its numbers have come after peers such as TCS, Wipro and HCL Technologies.

This is also the first time at least in recent quarters that it is declaring the numbers on a Sunday. Infosys’s revenues increased 23.6 per cent to Rs 34,470 crore from Rs 27,896 crore in the previous year period.

Revenues in constant currency terms rose 5.5 per cent sequentially and 21.4 per cent on a year-on-year basis. However, operating margins fell 150 basis points from the preceding three months to 20 per cent.

Brokerages had estimated the margins to come anywhere between 20.8 per cent and 21.5 per cent. IT services firms have seen their margins taking a hit as they have to offer higher wages to employees to avoid attrition which has risen across the industry. Large deal wins front also took a hit during the quarter as it fell to $1.7 billion from $2.3 billion in the preceding quarter.

However, Infosys raised the revenue growth guidance for the current fiscal to 14-16 per cent from 13-15 per cent earlier.

It also maintained the margin guidance at 21-23 per cent, though it is expected to come at the lower end of the range. Speaking to the press from Bangalore, Salil Parekh, managing director and CEO of Infosys, said that while large deal wins tend to be volatile, Infosys has gained market share during the quarter due to its cloud capabilities and differentiated digital value proposition.

He added that the growth was also broad-based across services lines and geographies.

"The growth that we have, we are gaining market share. We are significantly ahead leading the industry in growth and this is coming primarily from the positioning of our capabilities which are resonating with our clients both on digital and cloud,’’ he said.

Nilanjan Roy, chief financial officer indicated that the fall in margins was on account of wage hikes and sub-contracting cost.

He disclosed that during the quarter, while Infosys did record hiring (net number at 21,171) which was more than the other top five peers, its utilisation was affected due to the hiring of more freshers.

At the end of the quarter, Infosys had 3.35 lakh employees as against 3.14 lakh in the January-March period. On the other hand, attrition remained elevated at 28.4 percent against 27.7 per cent in the same period.

Replying to a query on the impact of rising inflation and interest rates, Parekh said that it has only affected some pockets such as mortgage and most of the sectors and geographies are showing a solid growth.

During the quarter, revenues from financial services declined to 30.6 per cent from 31.3 per `cent, though it showed a rise in the case of retail, communication, energy and manufacturing. In terms of geographies, while Europe was stable forthe company, the US and restof the world showed a sequential rise.