India's Infosys forecasts downbeat revenue as spending falters


By Haripriya Suresh and Sai Ishwarbharath B

BENGALURU (Reuters) -India's No.2 software services exporter Infosys forecast annual revenue below expectations on Thursday as global macroeconomic uncertainty pressures client spending on discretionary projects.

The news pulled down its U.S.-listed shares as much as 6% and raised concerns about future demand for the $254 billion Indian IT industry that has already been accepting tougher contract terms from clients to win large deals, after a sharp slowdown in growth from a pandemic-induced boom.

For fiscal 2025, Infosys forecast revenue growth between 1% and 3% in constant currency, while most analysts had expected it to be at least in the range of 2% to 5%.

"It's shocking," Nirmal Bang Equities analyst Girish Pai said. "It is possible they are being conservative."

"Potential factors dragging growth could include an election year particularly in the U.S. and interest rates being higher for longer, or if this is the normalisation of spending surge during the pandemic," he said.

The news came less than a week after larger rival Tata Consultancy Services reported lower-than-expected quarterly revenue on weak client spending in North America.

Revenue at Infosys rose 1.3% to 379.23 billion rupees ($4.54 billion) in the January-March quarter, but fell short of analysts' average estimate of 386.24 billion rupees, according to LSEG data. Its largest market, North America, reported a revenue decline of 2.1%.

CEO Salil Parekh gave a mixed outlook on the macro environment and said while there was "good traction" from clients on deals to boost cost efficiency, demand for discretionary projects was "still not as visible within the work we're seeing".

Large deal signings for the fourth quarter rose to $4.5 billion from $2.1 billion a year earlier.

Analysts said that the company's large deal bookings were good, but conversion to revenue remained slow.

($1 = 83.5130 Indian rupees)

(Reporting by Haripriya Suresh and Sai Ishwarbharath B; Editing by Sonia Cheema, Dhanya Skariachan and Devika Syamnath)