Infosys Rises After Positive Outlook, Announces Buyback Plan

Shares of Indian information technology (IT) giant Infosys Ltd. on Friday rose to their highest levels in a month after the company announced plans to repurchase $1.13 billion worth of shares and increased its revenue guidance for the current fiscal year.

Shares of Infosys climbed as much as 5.5% to an intraday high of ₹1,494, their highest since September 14. The stock last stood 1.6% lower in after-hours trading.

The Bengaluru-based firm now estimated revenue growth at 15%-16% in the fiscal year ending March, compared to its previous growth forecast of 14%-16%.

Infosys cited a strong demand pipeline as the reason for the raise. The company reported on Thursday that its net profit was up 11.1% to ₹6,021 in the second quarter.

Analysts also adjusted their expectations on Infosys’ annual revenue, expecting India’s second-largest IT company to post a 19% surge.

Caution on Global Macros

Despite the bullish view, Infosys lowered its operating margin guidance for the year to 21%-22% from 21%-23% as the challenging global macro-environment and concerns over an economic slowdown in the US and Europe, which is the firm’s major markets.

The demand environment is robust, although it may have lost some momentum from the highs of the fiscal year 2022.

Clients are slightly cautious about the uncertain and weakened macro environment, but that has not significantly affected IT spending yet, nor has it resulted in major delays in deal conversions or projects being called off.

Many Indian software exporters are also closely monitoring their costs amid budget tightening at their US and European clients, who are cautious about a potential recession.

Infosys Chief Executive Salil Parekh said while concerns on economic outlook continue, their demand pipeline is strong as their clients remain optimistic in their ability to provide the value they need, both on their businesses’ growth and efficiency.

Moreover, the company’s successful deals in the second quarter improved from the previous quarter. Its total contract value (TCV) for the quarter came in at $2.7 billion, with 54% representing net new deals. For Infosys, significant deals are ones that are worth more than $50 million.

Parekh stated that their latest TCV figures provide them with an excellent platform for future growth.

Infosys’ bullish outlook was contrary to the view of its bigger, domestic rival Tata Consultancy Services Ltd., which indicated earlier in the week low odds of outsourcing deals occurring, while it mostly added small- and medium-sized orders.

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