India’s technology services sector has officially hit the slow lane with Infosys cutting its revenue guidance for the financial year by more than half. The company said on Thursday that it expects to grow its revenues between 1%-3.5% in FY24 against 4-7%. The company retain margins between 20%-22% through FY24.
Explaining the rationale behind the guidance cut, Salil Parekh, CEO of Infosys, said: “We have seen signing deals but the start date of deals are getting delayed. We have seen volumes in some industries slowing and decision making has also slowed in large programme. In the short-term, we see a slowdown in discretionary deals. Revenues from large deals will flow through in the latter part of the year.” From the contrasting commentaries and performance by companies in the sector, analysts believe that growth dispersion would increase despite the aggregate slowdown.
The sharp cut in guidance came as a surprise as the financial performance of Infosys was in line with the market’s estimates. It reported a revenue growth of 1.4% quarter on quarter to $4,617 million. In constant currency, the company’s revenues grew 1% sequentially and 4.2% year-on-year. Large deals (total contract value) for the quarter was at $2.3 billion, with net new deals accounting 56.1% of the value.
While there is a slowdown in execution of the existing deal pipeline, velocity of new contracts suggests that the industry’s medium to long-term prospects look robust. Operating margin for the quarter was stable at 20.8%. The slowdown is more pronounced in the financial services sector.
