Infosys' (NASDAQ:INFY) fiscal 2010 first-quarter results show that there's just no way to outsource the negative effects of a global recession. Of course, you wouldn't know that from the market's reaction. Wall Street greeted the gloomy news by pushing up shares of the IT outsourcer more than 4%.

Along with better-than-expected volume and pricing, currency movements helped boost headline results. In rupees, profit rose more than 17% year over year. Dollar-denominated results -- although far less impressive -- were also positive, with year-over-year earnings per share rising slightly.

However, the underlying business, as judged by constant currency performance, reveals spending cutbacks among Infosys' client base. Sequentially, both revenue and volume declined, with volume falling 1.1%. Of course, that figure suggests that companies are adjusting their consulting and IT service budgets with a scalpel, rather than an axe. Also, shareholders can be comforted that rival Accenture (NYSE:ACN) recently reported volume weakness in certain business segments, and earlier in the year, Wipro (NYSE:WIT) admitted the possibility of a similar impact.

Optimists might be encouraged that Infosys added 27 new clients in the quarter, and that management raised the lower end of fiscal 2010 guidance. That is indeed good news, but be cautious here: The revised guidance comes courtesy of the first quarter's better-than-expected showing, not increased confidence for future quarters. CEO Kris Gopalakrishnan summed up the short-term outlook as follows: "it is going to be volatile. It's going to be challenging. It's going to be unpredictable."

I have two final points for investors to keep on their radar. First, Infosys operates in a highly competitive industry: Accenture and IBM (NYSE:IBM) are the global heavyweights, but Tata Consultancy, Wipro (NYSE:WIT), and back-from-the-dead Satyam (NYSE:SAY) are fellow Indian firms also jockeying for contracts. Currently, Infosys expects current-year earnings to sag 11.1%  to 12.4% in dollars. But if the competitive landscape provokes a second round of pricing negotiations, that forecast could prove rosy.

Second, management reported that client sentiment has turned negative in the past couple of weeks. Such a change seems to suspiciously coincide with the stock market's decision to finally begin accounting for harsh economic realities. That, in turn, prompts one to wonder whether companies will further restrict spending, should the market retest 2009 lows.

In the long run, I believe that Infosys' inspired leadership and strong balance sheet bode well for shareholder returns. However, compared to Wipro, Accenture, and IBM, Infosys is the only stock where the forward P/E exceeds the trailing P/E. That, combined with the uncertain near-term operating environment, makes me feel that investors would do best to pick up shares slowly, and only on dips.

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Fool contributor Mike Pienciak does not own shares of any company mentioned. The Fool has a locally sourced disclosure policy.