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Massively Rising Costs Hit India’s Infosys Results

India's Infosys fails to live up to analysts' earnings expectations as costs rise

India’s Infosys posted earnings for the June quarter that fell short of Wall Street analysts’ estimates after being hit by rising employee expenses, but the IT services company raised its annual revenue outlook, indicating that it will see strong demand going forward.

Information technology consultancy Tata Services – Infosys’ biggest competitor – and other small companies such as HCL Tech and Wipro have suffered slumping profit margins as they grapple with volatile expenses to gain superior industry expertise and retain employees.

Total expenses increased more than 29%, while operating profit margins at Infosys during the quarter came in at 20.1%, recording a decrease of 3.6% year-on-year, but the company maintained its guidance for full-year operating profit margins between 21-23%.

The company has been investing in high-quality talent by offering attractive employment offers and competitive pension compensation, which negatively affected profit margins, according to Chief Financial Officer Nilanjan Roy, but the Indian company expects revenue growth of 14-16% during the fiscal year ending in March, which is higher Slightly from its previous aspirations in April, between 13-15%.

Infosys consolidated net profit jumped 3.2% to 53.60 billion rupees ($12.5 million), but failed to reach analysts’ estimates of 56.26 billion rupees, while revenue grew 24% to 344.70 billion rupees. Notably, results for the April-June quarter were weak for IT services companies, as other companies – Tata, HCL and Wipro – also failed to meet analysts’ expectations for first-quarter earnings.

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