Infosys on Thursday missed Street estimates as it reported an 11 per cent growth in net profit for the first quarter ended June 30, and sharply cut the revenue guidance for this fiscal as some of its clients slowed down their discretionary projects in an uncertain environment.

The country’s second-largest IT services player reported a net profit of Rs 5,945 crore compared with Rs 5,362 crore (before minority interest) in the same period of the previous year. Analysts were expecting the company to report a net profit in the region of Rs 6,100-6,300 crore.

However, the bigger disappointment came when the Bangalore-based company slashed its revenue guidance to 1-3.5 per cent for the fiscal from its earlier projection of 4-7 per cent. It confirms the headwinds being faced by the IT services industry as sharp interest rate hikes by central banks have slowed western economies and hurt sectors such as financial services.

Salil Parekh, managing director and chief executive officer, told reporters that although Infosys had a good first quarter in terms of winning large deals, it encountered delays in the start dates at some projects.

He added that in the short-term some of its clients would either stop or slow down transformation programmes or discretionary spend. This, he disclosed, has been observed in industries such as financial services that include mortgages, asset management, investment banking, and payments. It is also been seen in telecom, high-tech, and certain segments in organised retail.

The drastic cut in its revenue guidance saw the Infosys ADR tumbling on the NYSE. It was trading at $16.06, a drop of 9.32 per cent at the time of writing this report.

The quarter saw Infosys reporting revenues of Rs 37,933 crore against Rs 34,470 crore in the year ago period, a rise of 10 per cent. Its operating margins came in at 20.8 per cent compared with 21 per cent on a sequential basis. Infosys has retained its operating margin guidance of 20-22 per cent for the year. Its large deal wins stood at $2.3 billion, up from $2.1 billion in the January-March 2023 period.

Parekh added that the large deal wins would help the company to set a strong foundation for future growth.

“Our generative AI capabilities are expanding well, with 80 active client projects. Topaz, our comprehensive AI offering, is resonating well with clients. We see this being transformative for clients and enhancing our overall service portfolio” he said.

The quarter saw attrition declining to 17.3 per cent from 20.9 per cent in the preceding three months though the total employee count was lower at 3,36,294 against 3,43,234 in the fourth quarter of last fiscal.

In terms of segment performance, revenues from financial services dropped 4.7 per cent, while the fall stood at 6.1 per cent for communications.

Among others, retail saw a growth of 4 per cent, manufacturing 21.3 per cent, high-tech 2.5 per cent and manufacturing 21.3 per cent. Geographically, North America saw a poor 2.3 per cent rise, while Europe was better at 10.9 per cent.

Ahead of the numbers, the Infosys stock closed 1.73 per cent lower at 1,448.84. Market circles feel the stock could come under pressure on Friday due to the cut in revenue guidance.