IT biggies post 14-20% topline growth in Q3; raise guard on uncertainties

India’s IT services heavyweights delivered between 14-20% on-year growth in topline for December quarter, as they raised guard on global uncertainties and choppy verticals, but remained hopeful that costs as well as business considerations will drive tech demand.

The tech earnings season began with large IT companies – Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies – declaring their Q3 report card this week, amid analysts’ gloomy prognosis around slowdown in advanced economies and fear of geopolitical flare-ups.

The industry leaders said they are keeping a close watch on the global economy and cues.
Overall, the revenue growth band of the top-tier IT players was pegged at 14-20% for Q3FY23, compared to the year-ago period. Seen sequentially, the topline growth for the large IT pack ranged between 3% and 8% versus previous September quarter.

Meanwhile, the December-quarter net profit of the top IT deck rose between 3% (Wipro) and 19% (HCL Tech) year-on-year; and about 4% (TCS) to 17% (HCL Tech) when computed on a sequential basis.

TCS revenue rises by 19.1%

TCS overall revenue rose 19.1% to ₹58,229 crore for the reporting quarter. TCS MD Rajesh Gopinathan said the firm is more confident about the North American and British operations, which account for two-thirds of its revenues, but there are short-term uncertainties, and it is Europe, which needs closer monitoring as geopolitical tensions restrict clients from making IT spends.

TCS management talked of “slow” decision-making in Europe, and said it is “fairly constructive” when it comes to markets like the US, although it is keeping a close watch on how things play out over the next couple of quarters.

Chief operating officer N Ganapathy Subramaniam said the deal momentum and pipeline are looking good, and the overall situation on technology spending seems to be intact even in this environment.

Also read: TCS Q3 net profit grows 11 pc to Rs 10,846 cr; revenue jumps over 19 pc

Infosys posts 20.2 pc y-o-y revenue increase

Infosys posted a 20.2% year-on-year increase in consolidated revenue for December quarter at ₹38,318 crore, and surprised many by hiking full-year revenue guidance to 16-16.5%. Infosys consolidated net profit rose to ₹6,586 crore during October-December 2022 as against ₹5,809 crore a year back, translating into 13.4% increase. Sequentially, the net profit was 9.4% higher than the September quarter.

The company raised its annual sales forecast on a strong deal pipeline, but in the same breath, it warned of “constraints” in certain verticals amid slowing global economy. Infosys called out mortgage, investment banking, telecom and hi-tech, saying these segments were “more impacted, leading to delays in decision-making and uncertainty in spending”. The company was, however, quick to add that sectors like energy, utilities and manufacturing continue to see traction.

Moreover, the concerns are more pronounced in Europe than the US, the Bengaluru-based IT bellwether said. “We see in the European markets, more concerns on what’s going on with the economy… and the US market is also there, but relatively less so in the US with respect to Europe. We will see how this plays out,” Infosys CEO Salil Parekh said during the Q3 results conference.

Also read: Infosys shares climb nearly 2% after announcing Dec quarterly profits

Wipro reports 2.8% rise in profit

Smaller rival Wipro has talked of potential slowdown in retail sector in its earnings roundup. The management’s talking points also touched upon “bit of a lag for conversion of bookings” and “certain level of volatility from customers in particular sectors regarding discretionary spendings”.

Wipro Ltd on Friday reported a better-than-expected 2.8% rise in consolidated net profit for the December 2022 quarter to ₹3,053 crore and exuded optimism about “strong” bookings for the fourth quarter despite global headwinds.

The company’s Q4 guidance, however, came below analyst’s expectations. Wipro said its IT services revenue is expected to grow in the range of -0.6% to 1% sequentially in constant currency in the quarter ending March 2023.

Wipro expects revenue from the IT services business for the full year to be in the range of 11.5-12% in constant currency terms. The revenues of Wipro stood at ₹23,229 crore in Q3FY23, 14.3% higher than the same period the previous year.

HCL records 19 pc increase in net income

Noida-headquartered HCL Tech posted a 19% increase in the consolidated net income to ₹4,096 crore for just-ended third quarter. Its consolidated revenue grew by 19.56% to ₹26,700 crore during the reported quarter, from ₹22,331 crore in the December 2021 quarter. HCL Tech narrowed current fiscal growth guidance in the range of 13.5-14% for the overall revenue in constant currency terms and margin to 18-18.5%.

“Looking ahead, we believe there is a near-term impact to a few industries, specifically technology industry clients, as they optimise while they will end up as great growth opportunities in medium term with the right propositions,” C Vijayakumar, CEO of HCL Tech, said.

“Looking ahead we remain positive of our medium term growth, a confidence generated by our good booking and pipeline across every segment,” he added.

(With agency inputs)