Why Infosys Share Price is Falling Today

Indian tech companies are still worried about fears of recession in the developed markets.

The biggest issue in the IT sector right now is the slowdown in spends and a remote possibility of recession.

So, as long as the slowdown persists and global growth remains uncertain, the market will face a challenging time with lesser order flow, slower execution and pricing challenges.

The impact will also show on the Indian share market. If the top IT companies undergo a severe correction, the entire IT pack is bound to see a gloomy situation.

Take the example of Infosys.

India's second largest IT company announced its quarterly results yesterday. The results showcased growth in terms of revenue and profit, but the growth was below market expectations which led to a sharp fall in the share price.

Infosys Q1 results

Infosys, the second largest IT company, announced its results for the June 2023 quarter post market hours on 20 July 2023.

The results were subdued. The growth in revenue and profit was below market expectations.

Infosys reported revenue of Rs 379 billion (bn), showcasing a growth of mere 1% on sequential basis. The operating margin of the company declined by 0.2% during the same period. The operating margin stood at 20.8%.

The company reported a profit after tax (PAT) of Rs 59 bn.

What was the key reason behind the decline? The margin guidance.

Infosys slashed its revenue guidance from to 1-3.5% from 4-7% projected earlier amid an increasingly challenging demand environment.

This also led to sharp fall in its American Depository Receipts (ADR) yesterday, which plunged around 9% in the pre-market session.

The sharp downward revision of its revenue guidance for FY24 was the slowest in many years, according to industry experts.

Management commentary

Infosys had the largest total contract value (TCV) of US$ 2.3 bn in the quarter under review. The growth and large deals helped the company set a strong foundation for the future growth.

Infosys is currently focused on expanding its generative Artificial Intelligence (AI) capabilities, with 80 active client projects. Topaz, a comprehensive AI offering is resonating well with the clients and enhancing over all service portfolios.

Also, the operating margin reported by Infosys can be said to be resilient in an uncertain macro environment. The improvement in capital allocation policy resulted in higher payouts to investors and improved Infosys' Return on Equity (ROE) to 32.8%.

Infosys has won US$ 454 million (m) contract from Danske bank. The deal is to be executed over a period of 5 years, with an option to renew the contract for one additional year for a maximum 3 times.

Infosys is also going to acquire Danske IT and support services India which is Danske Bank's IT centre in India for an estimated consideration of Rs 160 m.

Danske IT covers IT development and operations for Danske bank. Infosys is expected to help accelerate the bank's technology transformation, optimise their access to talent and capabilities and improve productivity.

The company will strengthen Danske bank's core business with greater digital and cloud capabilities. The company expects the Danske bank transaction to be completed by the September 2023 quarter.

How Infosys share price has performed recently

Infosys share price declined over 9% today in early trade following the announcements of results for the June 2023 quarter.

Infosys shares have gained 12.8% over the last one month while the shares have declined over 5.3% over the last six months.

Infosys touched its 52-week high of Rs 1,672 on 1 December 2022 and it has a 52-week low of Rs 1,216 touched on 25 April 2023.

About Infosys

Infosys is a global leader in next-generation digital services and consulting.

The company enable clients in more than 56 countries to navigate their digital transformation. With over four decades of experience in managing the systems and workings of global enterprises, Infosys expertly steer clients, as it navigates their digital transformation powered by the cloud.

The company enables them with an AI-powered core, empower the business with agile digital at scale and drive continuous improvement with always-on learning through the transfer of digital skills, expertise, and ideas from their innovation ecosystem.

To know more, check out the Infosys company fact sheet and quarterly results.

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