Shares of Infosys Ltd. will be reacting to the second quarter results on Monday, October 26, which saw the company cut its full-year revenue growth guidance. The results were reported after market hours on Friday.
The results led to the company’s US-listed shares (ADRs) end nearly 7% lower on Friday night.
Infosys Cuts Full Year Guidance
For the full financial year, Infosys now expects constant currency revenue growth to be between 1% to 2%, down from their earlier projection of 1.5% to 3%. The company though, maintained its EBIT margin guidance of 20% to 22%.
This is the second straight quarter of the company cutting its guidance as the first quarter had seen them narrow the upper end of the guidance range to 3% from 3.5%.
How Did Infosys Fare In Q2?
Infosys had a relatively weak quarter as well compared to its other largecap peers, as its constant currency revenue growth of 1.2% turned out to be lower than the CNBC-TV18 poll estimate of 1.4%, while its EBIT margins, at 21%, were also lower, compared to the poll estimate of 21.3%.
Why Did Infosys Cut Guidance Again?
Infosys attributed the guidance cut to a soft second quarter, softer volumes and pricing pressure due to competitive intensity in the market. The management said that they are only taking up deals, which meet their economic guidelines and parameters.
The management also said that there is likely to be margin pressure in the second half of the financial year due to wage hikes, which would be offset through Project Maximus.
Our Q2 has been softer and our volume continues to remain softer. We have also seen pricing pressure on the back of competitive intensity and higher ask on productivity. So all that is made in our revised guidance as we look forward. On top of that, as Salil said, some of the sectors we see, softness, retail, high tech, where the discretionary is lower than what we expected. So all of that is reflected in our guidance for the revenue, which is where it’s 1 to 2% now.JAYESH SANGHRAJKA, CFO, INFOSYS
Shares of Infosys had ended little changed on Friday ahead of the results announcement at ₹1,153.8 on the NSE. The stock is down 30% so far this year.