Infosys, HCL Tech cut financial year 2023-24, revenue forecast – Times of India

BENGALURU: Infosys and HCLTech have both cut revenue forecasts for the 2023-24 financial year, underscoring the continuing softness in discretionary spends by clients, and the volatile macro-economic environment. The headwinds in the banking and financial services vertical are particularly strong.
Announcing its financial results for the quarter ended September on Thursday, Infosys said it now expects its revenue to grow between 1% and 2.5% in FY24. Three months ago, it had guided for growth between 1% and 3.5%, and at the beginning of the financial year, it had guided for 4-7%. Clearly, client demand has sharply slowed.

The weak forecast pushed the share price down over 6% on the NYSE. The company announced its results after the local stock markets closed on Thursday.
The company’s worst growth in the past 15 years so far was during the great financial crisis in 2009-10, when growth fell to 3%.
Infosys CEO & MD Salil Parekh said, “We are seeing that the discretionary and large transformation programmes have reduced significantly, and we are seeing decision-making continues to be slow. Keeping these in mind, we’ve given guidance for the full year.”
HCL Technologies has cut its revenue forecast to 5-6% (including the acquisition of German auto engineering services firm ASAP) from its earlier estimate of 6-8% in constant currency for FY24. CEO & MD C Vijayakumar said, “The market is still a little tepid in terms of discretionary spending. And at the start of the year, we expected discretionary spending to come back partially, but with the continued macros, it’s not coming back the way we expected it to. For the guidance that we have given we need to still grow quite strongly in the second half including a very strong sequential growth in Q3 and Q4,” he said. However, he noted that the guidance of 4-5% organic growth and 4.5-5.5% services growth would still be one of the highest in the industry.
Infosys’s revenue grew 2.5% in the September quarter, compared to the corresponding period last year. Its large deal total contract value (TCV) was the highest ever at $7.7 billion, out of which 48% was net new. “We are winning market share in cost and efficiency projects. As the economic environment changed, we pivoted from delivering transformation projects to also delivering productivity benefits and cost savings at scale,” Parekh said.
Financial services declined 7.3% year-on-year in constant currency. Communication saw a 4.3% degrowth. Lifesciences and manufacturing grew 18.4% and 12.6% respectively. The primary market, North America, grew merely 1%, while Europe grew 5.4% in constant currency. Infosys’s operating margin rose 40 basis points sequentially to 21.2%.
HCLTech’s revenue rose 1% sequentially and 3.4% year-on-year in constant currency in the September quarter. HCL won 16 deals with a TCV of $3.9 billion that include 10 deals in services and six in software. The TCV has net new deals and does not include renewals. Vijayakumar said one of the big highlights of the quarter was the operating margins. “We recorded an 18.5% operating margin, a 154 basis points improvement at the company level. At the services level, margins improved 212 basis points. This is primarily driven by efficiencies in our managed services engagement automation and AI capabilities. We also significantly reduced our dependence on subcontractors. We have also cut discretionary spending like travel,” he said.