Infosys raises FY23 guidance to 14-16%

BENGALERU, INFOSYS GUIDELINES FOR EXERCISE 23 : Infosys Ltd, India’s second-largest software exporter, raised its full-year revenue growth forecast amid a robust deal pipeline, even as its quarterly earnings missed analysts’ estimates as salary costs were skyrocketing.

The Bengaluru-based company said it expects revenue to grow 14-16% in constant currency this fiscal year, faster than the 13-15% pace it forecast a year ago. about three months. Infosys, however, maintained its operating margin forecast at 21-23% for the year to March 31, although management expects it to be at the lower end of the range.

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The company’s net profit increased by 3.2% to reach 5,360 crores for the quarter ended June from 5,195 crore in the period a year ago, missing Bloomberg’s consensus estimate of 5,645 crores.

June quarter revenue increased 23.6% from a year ago to reach 34,470 crores on broad-based growth across all business segments, service lines and markets. Analysts expected Infosys to report 33,933 crore revenue.

Quarterly performance and sales forecasts from Infosys indicate that demand for IT services remains robust even as software services companies grapple with a talent shortage forcing them to raise salaries at a record pace, reducing margins. However, some analysts say demand for software services could weaken if the United States and Europe tip into a recession.

The company’s dollar revenue grew 21.4% year-over-year and 5.5% sequentially in constant currency to $4.4 billion, amid major contracts worth a total of $1 $.7 billion.

“We continue to gain market share and see a significant pipeline driven by our Cobalt cloud capabilities and a differentiated digital value proposition…our large deal pipeline is larger than it was in the past 3 to 6 months,” said Salil Parekh, Chief Executive Officer and CEO of Infosys.

Operating margin for the June quarter narrowed to 20% from 23.7% a year ago and 21.5% the previous three months, mainly due to wage increases and underwriting costs. high treatment.

“We are fueling the strong growth momentum with strategic investments in talent through competitive hiring and compensation reviews. While this will impact margins in the immediate term, it should reduce attrition levels and position ourselves well for future growth. We continue to optimize various cost levers to increase operational efficiency,” said Nilanjan Roy, CFO of Infosys.

The company’s digital revenue grew 37.5% in constant currency to $2.7 billion and contributed 61% to total revenue in the quarter ended June.

Financial services and retail are Infosys’ main verticals, accounting for nearly half of its revenue. Financial services revenue grew 12.1% annually in constant currency and contributed 30.6% to total revenue for the June quarter. Retail sales increased by 17.8% in constant currency, contributing 14.5% to total sales.

The attrition rate accelerated to 28.4% from 13.9% a year ago and 27.7% in the prior three months, indicating continued pressures from the supply side to respond to strong demand for talent.

The industry is grappling with high attrition rates as the demand for talent continues to outstrip the supply.

The company hired 21,171 employees during the June quarter, bringing the total workforce to 335,186 as of June 30.

“Given double-digit revenue growth, the growing share of digital business (61% of revenue), the likely improvement in Ebit (earnings before interest and tax) margin levels from current levels, and the comfort valuation after the stock price correction, we currently have a ‘buy’ recommendation,” said Mitul Shah, head of research at Reliance Securities.

On Friday, shares of Infosys fell 1.73% to 1,506.30 on BSE.

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