Infosys shares slip 4% after slight Q2 earnings miss

On 18 October, Infosys shares fell by 4% in early trading, following a slight miss in the company's second-quarter (Q2) earnings report. The IT giant reported a consolidated net profit of ₹6,506 crore for Q2FY25, a 2.2% sequential increase, but below the projected ₹6,769 crore. Revenue from operations rose 4.2% quarter-on-quarter to ₹40,986 crore, narrowly missing the forecast of ₹40,857 crore. 

The earnings miss weighed on the stock, prompting a decline that could impact share market investment strategies.

Stock correction anticipated

Analysts at Morgan Stanley had predicted the possibility of a short-term correction in Infosys' stock due to the earnings miss. Despite the dip, the brokerage sees this as ano opportunity for investors to consider building fresh positions. Morgan Stanley highlighted a technical support level at the stock's five-year average free-cash-flow multiple, which is around ₹1,780, as a potential buying point.

Following the market's opening, Infosys shares reached a day's low of ₹1,889 but recovered swiftly as buyers took advantage of the dip. By 09:24 am, the stock was trading at ₹1,936.85 on the National Stock Exchange (NSE), reflecting a partial recovery from the earlier decline.

Performance on the global stage

Infosys' American Depository Receipts (ADRs) also experienced a 4% drop on the New York Stock Exchange (NYSE) the night before. They hit the day's low before recovering most of the losses to close 1% lower. The movement in ADRs was consistent with the broader performance of the company's stock on the domestic market, indicating a similar investor sentiment across different exchanges.

Guidance lifted despite earnings miss

Despite the Q2 earnings miss, Infosys raised its full-year revenue guidance for FY25. The company now expects revenue growth in constant currency terms to range from 3.75% to 4.5%, up from the earlier guidance of 3% to 4%. The improved outlook was attributed to a strong and broad-based Q2 performance, which saw increased volumes and growth in small-deal pipelines. However, the operating margin guidance for FY25 remained unchanged at 20% to 22%.

Implications for share market investment

The slight miss in Infosys' Q2 earnings has temporarily affected its share price, but the company's raised revenue guidance offers a positive outlook. With technical support identified around ₹1,780, investors may consider the current dip as an opportunity for share market investment, especially given the potential for a discretionary spending rebound in the industry.