Infosys Ups Sales Forecast on IT Spending Revival Optimism

(Bloomberg) — Infosys Ltd. raised its annual sales forecast for the second time this year, suggesting clients are likely to revive spending on software services thanks to resilient growth and slowing inflation in major economies.

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Revenue should increase 3.75% to 4.5% in the fiscal year through March 2025, the Bangalore-headquartered company said. That compared with the average analyst estimate of 4.23%. Infosys had previously projected 3% to 4% growth.

Infosys’ performance in the first six months of the fiscal year that began April as well as the September quarter was one of the reasons for the improved sales projection, Chief Financial Officer Jayesh Sanghrajka told analysts in an earnings call Thursday.

“We saw continued momentum in volumes as well as the momentum in financial services. Our increase in the smaller deals, which are less than $50 million, has had a strong double digit growth,” he said. “All of these factors contributed to increase in the guidance.”

The projection could cheer IT companies around the world awaiting a revival in tech spending. Infosys’ larger rival, Tata Consultancy Services Ltd., last week expressed hopes of improving investment after the US Federal Reserve announced a bigger-than-expected rate cut.

For the second fiscal quarter through September, net income rose 4.8% to 65 billion rupees. Analysts expected 68.3 billion rupees on average. Sales climbed 5.1% to 409.9 billion rupees.

What Bloomberg Intelligence Says

“Infosys’ fiscal 2Q results don’t alter our expectation that a discretionary IT-spending recovery is unlikely for at least the next two quarters, despite management’s modest raise to fiscal 2025 sales-growth guidance.”

– Anurag Rana, analyst

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Investors remain hopeful that technologies such as artificial intelligence, supported by healthy economic growth, will spur IT spending over the longer term. Global GDP is expected to expand 3.2% in 2025, according to Bloomberg Economics.

Outsourcers such as Infosys are betting on machine learning, analytics and cloud computing to boost sales as global enterprises spend on IT services to transform legacy businesses to compete with nimble startups. Generative AI is also emerging as a bright spot for IT companies, though some like TCS say AI has yet to become a significant driver of sales.

Infosys shares ended 2.5% higher in Mumbai. The earnings were announced after the close of markets.

(Updates with CFO comment in fourth paragraph)