Infosys reports the highest Q1 growth in over 10 years, and the lowest margins this century

Infosys reported its highest fiscal first-quarter revenue growth in more than 10 years, and its lowest Q1 operating margins of this century, so far, as the company joins rivals in prioritising growth amid another global economic slowdown. Revenue for the three months ended June 30 was $4.44 billion, a 21.4 percent increase over the year-earlier period, the highest since Q1 of FY12. Operating margins came in at 20 percent. Notes: Infosys reported its highest fiscal first-quarter revenue growth in more than 10 years, and its lowest Q1 operating margins of this century, so far, as the company joins rivals in prioritising growth amid another global economic slowdown. Shares were down about 0.9 percent on the stock exchanges in Mumbai, at 10:10 a.m. local time. Revenue for the three months ended June 30 was $4.44 billion, a 21.4 percent increase over the year-earlier period, Bengaluru-based Infosys, India’s second-biggest IT services company, said in a press release. That is the highest first-quarter increase since Q1 of FY12. The company’s Q1 performance was “strong overall,” CEO and MD Salil Parekh, who recently saw his tenure extended by another five years, said in the press release. “We continue to gain market share and see a significant pipeline driven by our Cobalt cloud capabilities and differentiated digital value proposition,” he added. Cobalt refers to Infosys’s suite of cloud technologies and services. The company now attributes 61 percent of its revenues to digital-tech-based services, which grew 37.5 percent during Q1. India’s biggest IT companies, which are now among the world’s biggest software services providers as well, are strategically giving up some profit margins to ensure that they win large contracts and market share, senior industry analysts say. “Right now it’s a smart strategy to grow revenues to take market share and accept lower margins, for now,” Ray Wang, founder and principal analyst at Constellation Research told Forbes India in an email. “There is a labour market shortage and if you have the contracts, you have the work guaranteed to bring on new staff and train them so you can achieve a lower cost for delivery in the longer run,” Wang explains. Infosys’s fiscal Q1 operating margin came in at 20 percent, as the company continues to grapple with high staff churn, while CEO Salil Parekh said it has begun to moderate over the last two quarters. The June quarter operating margin is the lowest Q1 figure up to at least FY 2000 for which data is immediately available in the investors' section of the company’s website. Revenue growth, on a year-on-year basis, was in double digits across all business segments in constant currency terms, Infosys said in its press release. Net hiring was at 21,171 recruits for Q1. Infosys also increase its full-year revenue outlook to the range of 14-16 percent versus the previous 13-15 percent estimate from April. The company has retained its margin projection of 21-23 percent, and CFO Nilanjan Roy expects to hit the lower end of the range. Infosys press release https://www.infosys.com/investors/reports-filings/quarterly-results/2022-2023/q1/documents/ifrs-usd-press-release.pdf