Infosys released its Q2 results, which surpassed market expectations. However, Infosys revised its revenue growth guidance for the full year to a range of 1-2.5 percent. This change in guidance, along with concerns about the outlook, led to a 7% decline in the company’s American Depositary Receipts (ADRs) during New York trading.
Prashanth Tapse, Senior VP (Research) at Mehta Equities, stated that Infosys’ trimmed revenue guidance could negatively impact the stock’s performance. While the overall results were not significantly negative, the revised guidance could create pressure on the stock prices. Additionally, a gap-down opening in the range of Rs 1,400-1,420 may occur in the opening trade.
Ahead of the earnings announcement, Infosys closed at Rs 1,464.55 on the Bombay Stock Exchange (BSE), reflecting a 2% decrease in stock value.
Infosys had previously reduced its revenue growth guidance last quarter to a range of 1-3.5 percent from the initial guidance of 4-7 percent. Sumit Pokharna, Research Analyst and Vice President at Kotak Securities, acknowledged the impressive Q2 headline numbers. The company reported a 2.3% sequential increase in constant currency revenue and a 40 basis points quarter-over-quarter increase in EBIT margins, despite higher subcontracting costs and partial wage revisions.
Infosys achieved significant net profit figures and secured a record-large deal value of $7.7 billion. However, the revised guidance, particularly at the upper end of the range, implies the possibility of flat to a 1.9% decline in revenues over the next two quarters. Infosys is set to implement wage hikes starting on November 1, which may put pressure on its profitability.
