The top four Indian IT services firms —TCS, Infosys, Wipro, and HCLTech — saw year-on-year decline in their total contract value (TCV) during the July-September period, due to the absence of mega deals and continued lumpiness in large deals.
Further, geographically, revenue contribution from North America continued to decline for most them.
Despite this, they expressed optimism for demand recovery in the second half of FY25, especially in the BFSI sector and said smaller deals are helping sustain momentum even as larger clients delay decisions with AI and digital transformation projects being key drivers.
Brokerages attributed the fall in deals primarily to client hesitancy and macroeconomic uncertainties, with discretionary spending remaining weak.
TCS reported a TCV of $8.6 billion, down from $11.2 billion a year ago, despite a sequential increase from $8.3 billion in the June quarter.
Meanwhile, Infosys’ large deals TCV fell to $2.4 billion during the quarter against $7.7 billion reported in the year ago period. Further, it was also lower than $4.1 billion reported in June quarter.
HCLTech also saw decline in its deal wins taking the total contract value to $2.22 billion against $3.97 billion reported year ago. However, it grew sequentially from $1.96 billion reported in the June quarter.
Wipro, too, reported a year-on-year decline in its total bookings. The company’s TCV came in at $3.6 billion down from $3.8 billion reported in the year ago quarter. However, the large deal wins rose to $1.5 billion — the highest in the last 10 quarters, which was also higher than $1.3 billion reported in Q2 FY24.
Despite the overall decline in larger contracts, IT firms are observing an increase in smaller deals ranging from $1 million to $50 million, noting that these deals are helping to sustain momentum even as larger clients delay their decisions.
BFSI Sector Shows Signs of Recovery
All the four expressed optimism about demand recovery in the BFSI sector, particularly in North America. TCS noted an initial sign of growth momentum following the Federal Reserve’s first rate cut in four years.
Infosys echoed this sentiment, citing that BFSI clients are showing increased interest in technology investments aimed at improving operational efficiency. HCLTech and Wipro similarly observed a pickup in demand from their BFSI clients, contributing positively to their overall vertical performance.
Geographic Performance
While the companies are positive on demand recovery in the BFSI, the revenue contribution from North America continues to show declines for TCS, Infosys, and HCLTech, while Europe, Asia Pacific, and India experienced growth.
TCS’ North American revenue contribution fell by 190 basis points (bps) sequentially, settling at 47.6%. In contrast, the company’s revenue from the UK and Continental Europe rose by 10 bps and 20 bps, respectively, reaching 17% and 14.6%.
Additionally, TCS’s Indian market performance surged significantly with a 140 bps rise, taking the revenue share to 8.9%. The year-on-year increase in Indian revenue was even more substantial, jumping by 95%, primarily driven by the ramp-up in the BSNL deal.
Infosys also saw a decline in its North American revenue. The company’s revenue from this region dropped by 2.7% year-on-year in constant currency (CC) to 57.4% and saw a significant 15.5% growth in CC in Europe.
HCLTech also reported a decline in the Americas region, which fell by 90 bps sequentially in the September quarter. In contrast, the company’s revenue from Europe increased by 50 bps, while sales from the rest of the world rose by 40 bps.
Wipro saw sequential and year-on-year growth in its two primary markets, Americas 1 and Americas 2, which together account for approximately 60% of the company’s total revenues.
Discretionary Demand and Future Outlook
The companies agreed that discretionary demand remained subdued, and large transformational deals, particularly those with low immediate returns, were slower to close.
TCS noted that clients continue prioritising cost optimisation and efficiency over new investments. Infosys and HCLTech observed similar trends, stating that while pipeline deals exist, the decision-making process remains slower.
However, the firms are cautiously optimistic about the future. TCS mentioned that with the easing of interest rates, “consumer and industry confidence will get better,” which could lead to improved investment levels.
Infosys and HCLTech also expect demand to pick up in the second half of FY25, with AI and digital transformation projects being key drivers.
Further, all four firms emphasised their growing focus on AI and GenAI solutions. TCS reported having 600 AI/GenAI engagements in progress, with over 80 already in production.
Infosys and HCLTech also highlighted their investments in AI, with a focus on expanding their offerings in predictive analytics and automation. Wipro shared similar plans, citing increased client interest in deploying AI solutions across multiple business functions.
From: financialexpress
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