Investors Punish Infosys For Disappointing Q1 Results

Infosys Ltd ADR INFY announced 7.4 percent year-over-year growth in its net profit for the first quarter driven by 10.9 percent increase in the top line. However, both earnings and revenue fell short of the Street analysts' expectations. The company also provided tepid outlook for the rest of the year.

These were enough for the investors to drag down the stock by more than 9 percent in the pre-market on Friday.

Infosys reported net profit of $511 million or $0.22 a share for the first quarter. This represented YOY growth of 7.4 percent but a drop of 4.1 percent on a quarter-over-quarter basis. In the year-ago quarter, it earned $476 million or $0.22 a share. In any case, the earnings fell short of analysts' estimations of $0.23 a share.

The Indian technology bellwether's top line advanced 10.9 percent to $2.5 billion from $2.26 billion. On a constant currency basis, the revenue growth was 12.1 percent. On a Q-o-Q basis, revenue advanced 2.2 percent in USD terms and 1.7 percent in constant currency terms. However, revenue fell shy of the Street estimations of $2.55 billion.

Infosys said it could add three clients to $100 million plus category in the first quarter and that the total count now stood at 17.

Commenting on the results, the company's CEO, Vishal Sikka, said, "We had unanticipated headwinds in discretionary spending in consulting services and package implementations as well as slower project ramp-ups in large deals that we had won in earlier quarters, resulting in a lower than expected growth in Q1. Despite this, I am very encouraged by our progress in the execution of our strategy. We launched Infosys MANA, our AI based approach to helping clients continuously renovate their business processes and have already delivered on first client successes."

He continued, "We continued to see strong momentum in large deal wins in which we are bringing the best of our Renew-New strategy to every deal; and we continued to see growth in our delivery services due to their renewal on the basis of Zero Distance, Design Thinking and automation. Going forward, we will continue our strong focus on our long-term goals and vision of transforming Infosys where open, intelligent technology amplifies people and frees them to innovate in a culture of learning and collaboration, while bringing operational excellence and cost discipline to every aspect of our business."

Moving ahead, Infosys revised its revenue outlook to 10.5–12 percent growth in constant currency basis. Analysts are looking for 12.3 percent growth in revenue.