Infosys net profit declines by 7.2% YoY in third quarter
Infosys put out a modest performance for the third quarter of FY24 due to a weakened business environment and remained cautious about the future outlook.
Infosys reported a 7.2% year-on-year (YoY) decline in net profit for the third quarter of the current fiscal year owing to lower volume of business and cost increases including wages.
The net profit for the third quarter stood at Rs 6,113 crore. India’s second-largest IT services exporter generated revenues amounting to Rs 38,821 crore during the October-December quarter, which was a 1.3% YoY rise.
“We have not seen any different behaviour from them (clients) as the digital progammes are fewer and they are more focused on cost and optimisation deals,” Infosys CEO Salil Parekh said.
The operating profit margin for the quarter was 20.5%, which was a percentage-point decline impacted largely due to wage hikes given to the employees. At the same time, the IT services firm also narrowed its revenue growth guidance for FY24 to 1.5-2%. Previously, it indicated that the figure would be in the range of 1-2.5%.
Infosys said the large deal total contract value for Q3 FY24 stood at $3.2 billion, which was a decline from $7.7 billion in the sequential second quarter.
The company's performance for the third quarter was in line with the analysts' expectations who predicted it would register a marginal decline in its revenues.
The muted performance is largely due to macroeconomic challenges that the IT industry continues to face. The key markets of Infosys—North America and Europe—remain cautious about IT spending and there is no clarity on when their budgets will open substantially. This was evident from the growth rate of its largest revenue-generating business vertical—BFSI, which was down 5.2% in Q3 FY24. Even the revenue from North America was down 4.7%.
According to Parekh, the firm doesn't have much clarity on the forthcoming IT budgets of its customers as the process has just started and the almost flat growth in revenue is an indication of this uncertainty.
The dry spell in terms of projects has also had an impact on the company's headcount. At the end of the quarter, its total employee strength stood at 322,633—a decline of 24,182 over the last year.
In the earnings call, Infosys also announced the acquisition of the semiconductor design and embedded services provider InSemi for an enterprise value of Rs 280 crore. The company said this investment will strengthen its engineering R&D capabilities.
The stock price of Infosys closed at Rs 1,520.30 on Thursday, showing almost no gain from the close of Wednesday.
Edited by Kanishk Singh