MphasiS Ltd’s shares rose 4.02% on Thursday in response to its earnings announcement on the preceding day. It’s a mystery why the prices rose. The firm’s performance worsened last quarter with total revenue declining by 5.2% to $251.9 million (around 1,400 crore today).

Revenue from its top client, Hewlett-Packard Co. (HP), declined for the fifth successive quarter. While a decline in revenue from HP was expected, the extent of the decline, at 10.9%, was a huge negative surprise. And although HP revenue has been declining for some time, it still accounts for 55% of total revenue and influences overall results to a large extent. Revenue from the direct channel, or non-HP customers, grew at a modest rate of 2.8% in dollar terms.

The outlook for the HP business, especially the enterprise solutions segment, remains weak, with project ramp downs continuing. According to analysts at Dolat Capital, “Earnings visibility for the company remains low on account of uncertain volume/billing from HP—the renegotiation with HP is due in October." Additionally, it’s unreasonable to assume that non-HP customers will make up for the decline in HP revenue—especially given the muted demand environment for IT services. MphasiS itself is wary about its prospects going forward—it reduced its headcount in the application services and infrastructure technology outsourcing services segments by 906 employees, or 4.4%.

The only saving grace for investors was that the company managed to improve operating profit margin by 50 basis points, despite taking a hit on account of wage hikes given last quarter. Margins have been rising thanks to the increasing share of revenue from non-HP customers. But improving margins on a declining revenue base is hardly any consolation for investors.

Which brings us back to the surprising increase in the company’s shares—the only explanation for the jump appears to be the fact that they had declined by 5.5% in the week until the results announcement, at a time when the CNX-IT index was flat. So one can argue that investors were already expecting weak results and had sold MphasiS shares in anticipation. But there’s no reason why the shares should recover these losses, especially after its weak results. While valuations remain low at around nine times one-year forward earnings, successive earnings disappointments mean investors’ interest should be low.