Detailed Coverage

Infosys Q1FY27 Revenue Misses Estimates, Guidance Cut

Infosys reported revenue of -48,211 crore and Net Profit After Tax (PAT) of -7,769 crore for the first quarter of FY27. The IT major revised its FY27 revenue growth guidance downwards to 1.5%-3.0% from a previous 1.5%-3.5% range. This adjustment is attributed to softer volume growth, a project termination in the EURS segment, and continued weakness in European manufacturing spending.

Reader Takeaway: IT sector faces demand slowdown, but small finance banks show robust profit growth.

What just happened

Infosys announced its Q1FY27 financial results, revealing a revenue of -48,211 crore. This figure missed analyst expectations, leading the company to lower its full-year revenue growth forecast. The company also reported a PAT of -7,769 crore for the quarter.

Ujjivan Small Finance Bank, however, reported a strong quarter. Its Net Interest Income (NII) grew 38% year-on-year to -1,187 crore. Profitability saw a significant boost, with PAT surging 207% YoY to -317 crore, supported by reduced provisions. The bank raised its FY27 RoA guidance to 1.8-2.0%.

E-commerce platform Meesho also showed positive operational progress. It reported revenue of -3,713 crore, a 47.1% increase year-on-year. The company narrowed its EBITDA loss to -225 crore and its net loss to -133 crore. Net Merchandise Value (NMV) grew 34% YoY to -11,614 crore.

Why this matters

The downward revision in Infosys's guidance signals potential headwinds for the broader IT sector, affecting investor sentiment. Conversely, Ujjivan SFB's strong performance and raised guidance highlight resilience in the financial services sector, particularly among small finance banks. Meesho's continued growth and narrowed losses point to operational efficiencies in the e-commerce space.

The backstory

Infosys, a leading Indian IT services company, typically provides guidance on its expected revenue growth for the fiscal year. Lowering this guidance often indicates a reassessment of market conditions and future demand. Ujjivan SFB has been focusing on expanding its customer base and improving asset quality since its inception as a small finance bank.

What changes now

Investors will be closely watching the IT sector for signs of demand recovery and the impact of pricing pressures. For Ujjivan SFB, the increased RoA guidance suggests confidence in sustained profitability. Meesho's performance will be tracked for its path towards profitability.

Risks to watch

Infosys cited softer demand, project terminations, and pricing pressure as key challenges. Broader macro concerns include rising crude oil prices and Middle East tensions, which could impact global economic activity. Jai Corp's operations at its Vasona plastic processing unit have been suspended due to flooding.

Peer comparison

While Infosys faces a challenging demand environment, other IT firms may also experience similar pressures. Ujjivan SFB's performance contrasts with potential challenges faced by larger banks, showcasing the niche strength of small finance banks. Meesho's growth in the competitive e-commerce landscape stands out.

Context metrics (time-bound)

• Infosys Q1FY27 Revenue: -48,211 cr (YoY growth 14.0%)
• Infosys FY27 CC Revenue Growth Guidance: 1.5%-3.0% (revised down)
• Ujjivan SFB Q1FY27 PAT: -317 cr (YoY growth 207%)
• Ujjivan SFB Q1FY27 NII: -1,187 cr (YoY growth 38%)
• Ujjivan SFB FY27 RoA Guidance: 1.8-2.0% (revised up)
• Meesho Q1FY27 Revenue: -3,713 cr (YoY growth 47.1%)
• Meesho Q1FY27 NMV: -11,614 cr (YoY growth 34%)
• RailTel Order Value: -33 cr
• Apitoria Pharma Acquisition: USD 17 mn

What to track next

Investors should monitor IT sector demand trends, pricing power, and the impact of geopolitical risks. The progress of operational recovery at Jai Corp's facility and the successful integration of Cyient's acquisition will also be key. Additionally, tracking the earnings and guidance of other IT majors will be crucial.