The Bengaluru-based company said it expects revenue to grow 14-16% in constant currency this fiscal, faster than the 13-15% pace it predicted about three months ago. Infosys, however, retained its operating margin forecast at 21-23% for the year to 31 March, though the management expects it to be at the lower end of the range.
The company’s net profit rose 3.2% to ₹5,360 crore for the quarter ended June from ₹5,195 crore in the year-ago period, missing the consensus Bloomberg estimate of ₹5,645 crore.
June quarter revenue rose 23.6% from a year ago to ₹34,470 crore on broad-based growth across business segments, service lines, and markets. Analysts expected Infosys to report ₹33,933 crore in revenue.
Infosys’s quarterly performance and sales forecasts indicate that demand for IT services remains robust even as software services companies grapple with a talent crunch forcing them to raise salaries at a record pace, crimping margins. However, some analysts say that software services demand may soften if the US and Europe tip into a recession.
The company’s dollar revenue grew 21.4% annually and 5.5% sequentially in constant currency to $4.4 billion, amid large deal wins worth a total contract value of $1.7 billion.
“We continue to gain market share and see a significant pipeline driven by our Cobalt cloud capabilities, and differentiated digital value proposition…our pipeline for large deals is larger than what it was in the last 3-6 months," said Salil Parekh, chief executive officer and managing director, Infosys.
Operating margin for the June quarter narrowed to 20% from 23.7% a year ago and 21.5% in the preceding three months, mainly due to wage hikes and high subcontracting costs.
“We are fuelling the strong growth momentum with strategic investments in talent through hiring and competitive compensation revisions. While this will impact margins in the immediate term, it is expected to reduce attrition levels and position us well for future growth. We continue to optimize various cost levers to drive efficiency in operations," said Nilanjan Roy, chief financial officer of Infosys.
The company’s digital revenue grew 37.5% in constant currency to $2.7 billion and contributed 61% to the total revenues in the quarter ended June.
Financial services and retail are the largest verticals for Infosys, accounting for close to half of its revenues. Revenue from financial services grew 12.1% annually in constant currency and contributed 30.6% to the total revenue for the June quarter. Revenue from retail grew 17.8% in constant currency, contributing 14.5% to the total revenue.
The attrition rate quickened to 28.4% from 13.9% in the year-ago period and 27.7% in the preceding three months, indicating continued supply-side pressures to meet the high demand for talent.
The industry has been battling high attrition rates as demand for talent continues to outpace supply.
The company added 21,171 employees in the June quarter, taking the total headcount to 335,186 as of 30 June.
“Considering the industry-leading double-digit revenue growth, a rising share of digital business (61% of revenue), likely improvement in Ebit (earning before inteerst and taxes) margin levels from current levels and valuation comfort post stock price correction, we have a ‘buy’ recommendation at present," said Mitul Shah, head of research at Reliance Securities.
On Friday, shares of Infosys fell 1.73% to ₹1,506.30 on BSE.
