Earnings season update: Infosys loses over 8% in market value after disappointing Q4 results

The operating profit margins contracted by 300 basis points YoY.

The earnings season has embarked, and the IT giants have come out with their quarter ended March and FY22 results. Investors were neutral with TCS but were disappointed with the results of India’s second-largest IT company Infosys Ltd. The contraction in the margins and lower than expected growth in financials led the stock to slip by over 7% yesterday and over 1% today as well.

As for Q4 FY22, it reported 20.6% constant currency YoY and 1.2% QoQ growth in revenues which stood at Rs 32,276 crore. Large deal win momentum and growth in the cloud services segment led to strong revenues. It recorded an operating profit of Rs 6,956 crore which saw a growth of 8% YoY but witnessed a decline of 7% over the previous quarter. Margin disappointingly contracted by 300 bps YoY and 200 bps sequentially to 21.5%. Infosys had previously guided margins in the range of 22-24%. The PAT stood at Rs 5,686 crore which increased by 12% YoY but declined by 2.1% sequentially.

For the year ended FY22, its revenues grew by 20.7% YoY in constant currency terms. The operating profit saw a rise of 13.8% and the margin stood at 23% which contracted by 150 bps when compared to FY21. The PAT for the year witnessed a growth of 14.3%. According to the CEO and MD Salil Parekh, the annual growth has been the highest so far in the decade. And for the next fiscal i.e. FY23, the company has provided the earning guidance with expected 13%-15% growth in revenues and operating profit margin guidance of 21%-23%.

Notably, the company’s attrition rate has gone high up to 27.7% in Q4 compared to 25.5% in Q3. For an IT company, the cost of employees is significant. Compared to TCS, Infosys numbers did not look good at least when compared to the previous quarter.