Infosys Ltd. cut its annual sales forecast, signaling companies are delaying discretionary technology spending amid fears of an economic slowdown.

Infosys, India’s second-largest software services exporter, said Thursday it expected revenue to grow between 1% to 3.5% in the year through March 2024, compared with the 4% to 7% growth it projected previously. Analysts on average expect 7% growth.

India’s more than $245 billion software services sector, led by Tata Consultancy Services Ltd. and Infosys, is struggling with a hazy growth outlook as a Covid-induced boom in outsourcing fades. Still, Bengaluru-based Infosys remains optimistic about its long-term prospects as companies adopt new technologies such as generative artificial intelligence.

Mumbai-based TCS cautioned last week that enterprise customers were delaying projects which weren’t critical to business.

Infosys is the last among large technology companies in India to report earnings. Its shares have fallen 4% so far this year, trailing a broader Mumbai market that’s gained 11%.

India’s showpiece outsourcing industry began by offering cheap backoffice solutions to some of the world’s biggest corporations, giving rise to the term “Bangalored,” and became critical to businesses as it handled problems such as the Y2K bug for them. It is now banking on the rise of big data, AI and machine learning to drive business transformation deals and earn higher margins.

What Bloomberg Intelligence Says

“Infosys’s fiscal 1Q24 results will likely highlight a challenging IT-spending climate, with the potential for a larger-than-expected slowdown from TMT clients, akin to what Accenture reported on June 22.”

- Anurag Rana, senior analyst

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For the quarter ending June, Infosys posted a net profit of 59.45 billion rupees ($726 million), up 11% over the previous year. Analysts expected a profit of 62.45 billion rupees. Sales rose 10% to 379.33 billion rupees.