IT major Infosys results for the fourth quarter missed street expectations both on revenue and guidance fronts, margin expectations however were closely met. Analysts said that management commentary was uninspiring and expect the stock to underperform in the near term. 

Sanjeev Hota, Head of Research, Sharekhan by BNP Paribas, said, “Infosys delivered a surprisingly weak set of numbers for Q4 and missed our and street estimates on multiple fronts on the back of unplanned project ramming down and cancellation across the sectors. Revenue decline of -3.2 per cent q-o-q on constant currency basis, is worse than sequential decline seen in the peak of covid-19. Also, FY24 guidance seems to be modest and below our expectations both on revenues and margins.”

Further TCV wins at $2.1 bn or the quarter was weak, down 36 per cent q-o-q and 9 per cent y-o-y. Management commentary does not inspire confidence on business outlook amid uncertain demand environment. We expect stock to witness weakness and underperform in the near term, Hota added. 

Amidst headwinds

Similarly, Biswajit Maity, Principal Analyst at Gartner said that In spite of a strong performance over the past few years, Infosys is facing some headwinds because of the current demand environment, trade-offs to sustain margins, senior-level departures, and strong competition in the market. But due to Infosys’s enhanced capabilities in digital transformation, customers are more confident to do business with them.

“In order to keep their growth momentum for upcoming years, they need to focus on their attrition rates which are high in comparison to their peers. It’s good that they are already familiar with this caution and considering the necessary steps to overcome it,” he further noted. 

Disappointing numbers

Omkar Tanksale, Senior Research Analyst, Axis Securities, said, “Infosys has missed expectations on all fronts. The set of numbers posted were very disappointing. On the outlook front too, the guidance provided is very low and we can expect slowdown in the next couple of quarters as well.”

Although the company has given conservative guidance, they may later increment the range, however, stable deal flow is one positive aspect, he added. 

While Infosys released its numbers after trading hours in India, the company’s ADR listed on NYSE was down by nearly 4 percent in early trading indicating a possible gap down opening on Friday. 

Even ahead of the earnings announcement, Infosys’ share price had dipped 1.77 per cent in early trade on Thursday to ₹1,402.95 per share on Indian exchanges.

Related Topics