ADRs for Infosys Decline as the Company Lowers its Revenue Forecast a Second Time


Infosys’ US-listed shares witnessed a significant drop of up to seven percent in the initial trading session on Thursday, following the company’s second consecutive reduction in its full-year revenue forecast. The decline in American Depository Receipts (ADRs) suggests a potentially weak opening in the upcoming trade session. Despite lowering the revenue guidance, Infosys maintained its operating margin forecast at 20-22 percent for the financial year 2024, indicating a focus on preserving margins amid a challenging business environment. CEO Salil Parekh mentioned that discretionary and large transformation programs have notably slowed down, leading the company to prioritize cost efficiency and automation, areas where it holds a competitive advantage and continues to secure significant deals.

Infosys, the second-largest software services exporter in India, has been gradually revising its sales projections since the beginning of the financial year. Initially forecasting revenue growth of 4-7 percent for fiscal year 2024 in April, the company later adjusted it to 1-3.5 percent in July, with a further 100 basis points reduction in the upper band to 2.5 percent in the latest revision. The company’s revenue, in constant currency terms, demonstrated a growth of 2.3 percent for the three months ending September, surpassing expectations from a CNBC-TV18 poll, which anticipated growth between 0.9-1 percent. In the June quarter, Infosys reported a constant currency revenue growth of 1 percent.

Despite the challenging market conditions and the recent decline in share value, Infosys remains resilient in its operating margin outlook. The company’s strategic focus on cost efficiency and automation reflects its commitment to navigating the evolving business landscape and seizing opportunities in mega deals. However, the persistent downward revisions in revenue forecasts indicate ongoing challenges for the IT giant in the second half of the financial year.

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