Infosys, HCLTech Tweak Full-Year Revenue Outlook Due To Macroeconomic Woes

Infosys cut its FY24 growth outlook by 100 basis points to 1-2.5 per cent, while HCLTech has reduced revenue growth guidance for the full year in the range of 5-6 per cent

The tech earnings season began on a sombre note on Wednesday, with Tata Consultancy Services reporting a weak Q2 scorecard.

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Indian IT heavyweights, Infosys and HCL Technologies, have tweaked their full-year revenue outlook as macroeconomic challenges continue to weigh on global discretionary spends. Infosys posted a 3.1 per cent rise in its second-quarter net profit in line with the market expectations but cut its annual sales forecast in a clear sign of continuing curtailment in IT projects amid macro uncertainties.

The Bengaluru-headquartered Infosys cut its FY24 growth outlook by 100 basis points to 1-2.5 per cent against 1-3.5 per cent guided earlier.

Infosys cautioned that discretionary projects and large transformation programmes have reduced significantly and indicated that it could give campus recruitment a miss this year though it is monitoring the situation every quarter.

Telecom, hi-tech, financial services (payments, investment banking), and retail are among sectors that are seeing weak demand, Infosys CEO Salil Parekh said, adding that manufacturing and life science space continue to do well. The consolidated net profit of India's second-largest software services exporter rose to Rs 6,215 crore in July-September from Rs 6,025 crore a year back and Rs 5,945 crore in the first quarter of this fiscal.

HCLTech has reduced revenue growth guidance for the full year in the range of 5-6 per cent from 6-8 per cent projected at the end of June 2023 quarter due to its below-expectation performance during the first half of the current fiscal.

HCLTech CEO and Managing Director C Vijayakumar said the growth during the first half has been much lesser than expected, and the company will need to post strong growth on a sequential-quarter basis, both in the third and fourth quarter, to match the growth guidance for the full year. "The discretionary spend is still very soft. We have not seen the discretionary spend pick up like we anticipated," Vijayakumar said.

The Noida-headquartered IT services firm plans to hire 10,000 freshers in the current fiscal year compared to around 27,000 freshers it recruited in 2022-23.

The tech earnings season began on a sombre note on Wednesday, with Tata Consultancy Services (TCS) reporting a weak Q2 scorecard. The country's largest software exporter reported an 8.7 per cent increase in September quarter net profit to Rs 11,342 crore, missing street estimates. In its management commentary - a key monitorable for the market - TCS made it clear that the headwinds for the IT sector continue amid a sluggish economic climate.

TCS revenue increased 7.9 per cent in the September quarter to Rs 59,692 crore but was up only marginally compared to Rs 59,381 crore in the preceding June quarter. As it is, ahead of the Q2 results, analysts tracking the sector had anticipated that a large Indian IT services pack will report a "muted" sequential show in a traditionally strong second quarter as macroeconomic challenges continue to weigh on global discretionary spending.