India’s second-largest IT services firm Infosys reported a lower-than-estimated 3.2% rise in June quarter net profit to ₹5,360 crore as operating margin declined on rising expenses.
Revenue rose 23.6% to ₹34,470 crore in April-June – the first quarter of the current fiscal year.
Infosys raised its full-year FY23 (April 2022 to March 2023) revenue guidance to 14-16% from the 13-15% it had projected earlier, backed by Q1 growth, and a strong demand outlook.
Sequentially, the profit declined 5.7% from ₹5,686 crore in the January-March quarter.
Operating margin declined to 20.1% in the first quarter of the current fiscal when compared with a 23.7% a year earlier and 21.5% in January-March. Operating expenses rose 14.4%, as selling and marketing cost went up.
The street was expecting a 5.5% to 9.5% year-on-year growth in consolidated net profit. Sequentially, analysts had expected a drop in earnings but by less than 1%.
“Our strong overall performance in Q1 amidst an uncertain economic environment is a testament to our innate resilience as an organisation, our industry-leading digital capabilities and continued client-relevance,” Salil Parekh, CEO and MD of Infosys, said in a statement.
“We are investing in rapid talent expansion while ensuring rewarding careers for our employees, to better serve evolving market opportunities. This has resulted in a strong performance in Q1 and increase in FY23 revenue guidance to 14-16%.”
Infosys’ larger IT rival Tata Consultancy Services and also smaller rivals such as HCL Technologies and Wipro have seen their margins erode as they battle a higher sector-wide talent churn and try to retain employees.
Infosys saw its large deal signings dropping about 35%, while gross addition of clients during the quarter dropped to 106 from 113 a year ago.
But Mr. Parekh said the company was seeing ‘good traction’ with large clients.
The April-June quarterly earnings reports have started on a weaker note for Indian IT services companies, with TCS, HCL Technologies and Wipro also missing their first-quarter profit estimates.
(With Reuters inputs)
