Infosys Raises Sales Forecast Despite Stagnant IT Spending

Infosys raised its annual revenue outlook after eking out a 1 percent rise in quarterly net income, as newer digital services helped it bag contracts despite shrinking client budgets, according to Bloomberg.

Asia’s second-largest outsourcer of IT services forecast a 7.1 to 9.1 percent climb in revenue for the year ending March 2018 on a U.S. dollar basis. That beat analyst estimates and its own previous outlook, both of which projected growth of 6.1 to 8.1 percent.

The raised outlook suggests Infosys, a favorite sector pick of many investors, is gaining a measure of stability after initiating deep job cuts and moving into new areas such as data analytics to stem customer losses. India’s $154-billion information technology industry is grappling with increasing automation and a changing technology landscape that’s pressuring margins at companies from Wipro to Tech Mahindra. Infosys said at a shareholders meeting that over 11,000 jobs had been “released“ due to automation.

It reported earnings just a day after larger rival Tata Consultancy Services announced a bigger-than-expected 6 percent fall in net income. Infosys posted net income of 34.8 billion rupees ($540 million) in the three months ended June, compared with the 34.3 billion rupee average of estimates. On a constant currency basis, it’s sticking with a prediction for 6.5 to 8.5 percent revenue growth in fiscal 2018.

In the vital U.S. market, Infosys has been challenged by the Trump administration’s tightened rules on H-1B skilled worker visas, of which Infosys leads in usage among peers. Amid the restrictions, the company announced it would hire 10,000 workers in the U.S. over the next two years. That is likely to raise costs since salaries for skilled engineers in India are far lower.