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India's Infosys falls as annual revenue outlook disappoints

FILE PHOTO: Illustration shows Infosys logo

BENGALURU (Reuters) - Shares of Infosys fell as much as 2.9% on Friday, a day after India's No.2 software services exporter forecast annual revenue below expectations, raising doubts over predictions of early recovery in the sector.

Its shares were down at 2% at 1,390 rupees by 09:19 a.m. IST, their lowest since Nov. 2023.

The stock is down 8% this year, the worst performer among top-tier Indian IT services companies. Larger rival Tata Consultancy Services is up 2.3%, while the Nifty IT services index is down 5.7%.

Some analysts termed Infosys' quarterly performance and outlook "disappointing."

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"Results of both TCS and Infosys suggest recovery is likely to be even more modest versus earlier, with sluggish large segments, existing business leakages and weaker discretionary demand hurting," Ambit Capital said in a note.

TCS last week reported fourth-quarter revenue below estimates on weak client spending, while analysts said the country's top IT services company faces near-term growth headwinds.

At least fourteen analysts cut their target price on Infosys after its results as per LSEG data. The median target price of 39 analysts has fallen to 1,650 rupees from 1,720 rupees on March 19.

While there were some hopes of recovery for Indian IT companies in fiscal year 2025, Infosys missing its already lowered revenue guidance for fisal year 2024 "raises concerns on growth predictability," Emkay Global said in a note.

Infosys' revenue forecast also drove some analysts to cut their outlooks for the next two fiscal years.

"We see elevated execution risk and limited near-term revenue upside potential," Macquarie analyst Ravi Menon said in a note.

(Reporting by Sethuraman NR in Bengaluru; Editing by Varun H K)