Infosys & HCLTech meet Q2 estimates, trim revenue forecast for FY24

Keeping in line with analyst estimates, homegrown IT giants - Infosys and HCL Tech on Thursday announced a single digit growth in their quarterly earnings for the period ended September 30, 2023, while revising lower their revenue guidance for the full financial year (FY24).

Infosys, the second largest software sevices exporter, reported a 3.2% increase in net profit at Rs 6,212 crore, alongside a 6.7% rise in revenue year-on-year. HCLTech, on the other hand, posted a 9.8% increase in consolidated net profit to Rs 3,832 crore, accompanied by Rs 26,672 crore in revenue.

Infosys narrowed its revenue forecast for FY24 by 100 basis points, now expecting it to range between 1-2.5%. "On guidance, we are seeing discretionary projects and large transformation programmes have reduced significantly, and we are seeing decision-making continues to be slow. As we have looked at this quarter, the volumes are still under constraint and keeping that in mind, we have given our guidance for the full year," Infosys CEO and MD Salil Parekh said.

HCL on the other hand, revised its revenue growth guidance to 5-6% in constant currency terms, from earlier estimate of 6-8%. The company blamed soft numbers during the first half of the year for the revision.

The boards of the two IT conglomerates also approved interim dividends of Rs 18 and Rs 12 apiece, respectively.

“We had our highest large deals value at $7.7 billion in Q2 spread across all verticals and geographies. This, in an uncertain macro-environment, is a testament to our ability to pivot and stay relevant to the evolving client needs…,” said Parekh. 

HCLTech, on the other hand, reported its biggest-ever quarterly order book at $4 billion, led by 16 large deals. “This achievement underscores our ability to seize exceptional opportunities in the market and gives us optimism for our medium-term growth prospects,” said C Vijaykumar, CEO and MD, HCLTech.

Both companies however reported a net decline in headcount addition. HCL’s employee headcount declined by 2,299 during the quarter, even as attrition eased to 14.2%. Fresher addition for the company stood at 3,630 in Q2. Overall, the company has a target to onboard 10,000 freshers for the ongoing fiscal year, a senior spokesperson said during the post-earnings press conference. Its campus placement program is on track, as planned, he added.

Infosys saw its workforce decline by 7,533 sequentially, as attrition was reported at 14.6%. Furthermore, the IT major will not be visiting college campuses to recruit freshers in the back half of the year. “Wage hikes to employees will be rolled out from November 1,” said company CFO Nilanjan Roy. The company did not make any disclosure on variable pay.

Infosys retained its operating margin guidance in the range of 20-22%. “Our Q2 operating margin of 21.2% demonstrates the early benefits of recently unveiled margin improvement plan and is a clear reflection of our ability to continuously identify opportunities for improving operational efficiencies," said Roy.

Talking about the impact of escalating tensions in the Middle-East, Parekh said: “we are saddened by it. All of our employees are safe in that business,” adding that a majority of the company’s employees in the region are locals.

Ahead of the second quarter results, shares of Infosys settled 1.95% lower at Rs 1,464.55 apiece on the Bombay Stock Exchange. A similar trajectory followed for HCLTech, reflecting a 1.7% fall at Rs 1,224.05 per share.