Explained: Why Infosys shares fell 5% after Q2 results

Shares of Infosys saw a sharp drop of 5% on Friday, following the release of its Q2 FY25 results. The stock price fell to Rs 1,869 as investors reacted to lower-than-expected financial performance and revenue guidance.
Although Infosys raised its FY25 revenue growth guidance to 3.74%-4.5%, up from the previous estimate of 3%-4%, analysts mentioned that this fell short of market expectations. Domestic brokerage Motilal Oswal pointed out that while there was broad-based revenue growth, Infosys’ cautious outlook on discretionary spending caused disappointment.
The company highlighted ongoing challenges, particularly outside the US banking sector, with limited recovery in discretionary expenditures. Infosys also postponed wage hikes for the fourth quarter of FY25 and the first quarter of FY26, signalling uncertainties in the near term.
Motilal Oswal said, “The guidance was upgraded by just 50 basis points at the top end, despite a strong 3.5% compound quarterly growth rate (CQGR) in the first half of the year. This suggests a muted CQGR of approximately 0.5% for the second half of FY25. This indicates that while client pessimism may be stabilising, a significant rebound in discretionary spending is yet to materialise.”
There was some optimism, however, regarding the company’s performance in smaller deals, those worth less than USD 50 million in total contract value. While Infosys refrained from calling this a trend, Motilal Oswal believes it could signal early signs of business flow returning to both the company and the sector, potentially positioning it favourably for FY26.
On Thursday, after the market closed, Infosys reported a profit after tax (PAT) of Rs 6,506 crore for the second quarter ending in September 2024. This represented a 5% year-on-year (YoY) increase from Rs 6,212 crore in the same period last year. However, the PAT figure was below the Street’s expectations, which had forecasted Rs 6,700 crore.
Revenue from operations grew by 5% YoY, reaching Rs 40,986 crore, compared to Rs 39,360 crore in the same quarter last year. In constant currency terms, revenues grew by 3.3% YoY and 3.1% quarter-on-quarter (QoQ).
Infosys also declared an interim dividend of Rs 21 per equity share, with October 29, 2024, as the record date. The dividend is set to be paid on November 8, 2024.