IT RESULTS: Facing Headwinds

The Top 4 Indian IT companies by market cap reported big deal wins in Q2, but trimmed their growth outlook anticipating more pain ahead

- AAKANKSHA CHATURVEDI

THE SECOND QUARTER (July to September) earnings season has kicked off and it hasn’t been all good news for the information technology majors—Tata Consultancy Services (TCS), Infosys, HCL Technologies (HCLTech), and Wipro. A decline in revenues, a slowdown in growth, and a cutback in hiring were prominent themes across IT companies. Although the firms’ managements sought to highlight the big deal wins, they trimmed the outlook for the upcoming quarters.

TCS, the leader in terms of market capitalisation, missed street estimates in Q2FY24. Its revenue was up 0.5 per cent sequentially at ₹59,692 crore, but was up 7.9 per cent year-on-year. In US dollar terms, revenue declined for the first time in over 13 quarters, dipping 0.2 per cent sequentially. The company reported a net profit of ₹11,342 crore, up 2.42 per cent sequentially, but below estimates.

Analysts at ICICI Securities downgraded TCS after noting that the demand environment for IT companies was tough. “Revenue growth continues to be muted despite strong deal TCV (total contract value) of $10 billion-plus for three consecutive quarters, due to rationalisation of discretionary spends in existing projects and completion of certain large transformation projects,” the analysts said.

Similar trends were observed at Infosys, which reported revenue of ₹38,994 crore. In constant currency terms, Infosys reported revenue growth of 2.3 per cent sequentially, operating profit of ₹8,274 crore and an Ebit (earnings before interest and taxes) margin of 21.2 per cent.