Shares of Infosys, India's No. 2 IT services provider, fell as much as 4.5% on Friday after a cut to the upper end of the company's annual revenue forecast fanned further worries of a delay in demand recovery in the sector.
The Bengaluru-based company's stock trimmed some losses to trade down 3%, but still weighed on the Nifty IT index which fell 0.7%, adding to a sharp 1.6% drop in the previous session.
Several analysts said the IT company's move to cut outlook for the second straight quarter was emblematic of near-term challenges for the $245-billion sector, with clients cutting discretionary spending after a pandemic boom. They do not see demand for IT services companies returning anytime soon.
"Conversion of existing orders into revenue is a problem for all IT companies since clients are delaying the execution of these orders," said Avinnash Gorakshakar, head of research at Profitmart Securities. "U.S. and Europe are still not in a healthy shape, new order wins and their execution is not expected in the 6-8 months."
Larger rival TCS, which does not provide revenue outlook, missed second-quarter revenue estimates earlier this week, while HCLTech cut its revenue forecast. Wipro is due to report results next Wednesday.
"Infosys continues to grapple with unplanned ramp-downs and longer sales cycles for large deals. We expect this environment to continue throughout fiscal 2024," analysts at U.S.-based investment banking services company William Blair said.
Infosys said on Thursday it now sees full-year revenue growth at 1%-2.5%, excluding foreign exchange volatility, versus a prior view of 1%-3.5%.
Its second-quarter profit, at ₹6,212 crore, also missed analysts' expectations of ₹6,295 crore. HCLTech, which initially dropped 1.2% in the session, reversed course to trade 2.8% higher.
HCLT's profit rose 9.8% and marginally beat analysts' estimates of ₹3,712 crore, while revenue, at ₹26,672 crore, fell short of analysts' expectations of ₹26,814 crore.
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