Analysts say revenue could take a hit as clients slow spending during outbreak
Infosys is joining the growing number of tech companies that are pulling away from giving guidance for their upcoming fiscal years due to the uncertainty created by the ongoing worldwide COVID-19 pandemic.
The Lowdown: Officials with the global systems integrator said this week that Infosys registered strong quarterly and yearly financial numbers despite the softness in March due to the coronavirus crisis. Revenue for the year was up 8.3%.
The Details: The rapid changes in how companies are doing business driven by the coronavirus outbreak has led to a surge in demand for IT services but has hampered companies’ ability to deliver those services. More than 93% of Infosys employees are working from home. At the same time, many of the financial service firms and other customers also have the bulk of their employees working out of the office.
Given the economic uncertainty fueled by the pandemic, a growing number of major IT companies like Dell Technologies, VMware, and IBM have announced they are pulling guidance on future fiscal quarters.
The Impact: In the wake of Infosys’ decision announced this week, some analyst firms are predicting sales declines for the company. According to Bloomberg, Nomura Financial Advisory and Securities expects a 3% drop in Infosys turnover as clients spend less on technology. Investec Securities is forecasting a 6% fall. The pandemic will hurt revenue by 5% to 10%, said D.D. Mishra, senior director analyst at Gartner, adding that 40% of Infosys’ revenue comes from the banking, financial service, insurance, and manufacturing industries, which are seeing disruptions around the world.
The Buzz: “What we are seeing today is overall, there is no real clarity on when things are going to be back into a situation where we have a clear view to give a guidance,” said Salil Parekh, Infosys’ CEO and managing director. “Today, we definitely see in the short term some concerns where the business environment is extremely difficult. However, when we start to see this business environment stabilize and we have visibility, we will be back with what we see in terms of guidance.”
“Given the company’s historical track record of adapting to multiple business challenges and technology change cycles, we believe it will be able to navigate through COVID-19 headwinds,” said Sudheer Guntupalli, an analyst at Motilal Oswal Financial Services, in a note.
“Of our workforce, 93% is currently working from home,” Infosys COO Pravin Rao said. “We are in no hurry to get employees back to offices. Our first phase of returns, when it happens, will likely get 5% employees returning, and in the next phase will total about 15%.”