Infosys, TCS Stand Out As Pandemic-Led Digital Shift Drives Q3 IT Earnings

India’s largest information technology firms’ earnings beat estimates for the second straight quarter as operations returned to normal on improving client spends.

Among the top four software services providers, Tata Consultancy Services Ltd. and Infosys Ltd. guided for double-digit growth in the financial year 2022. Wipro Ltd. upped its guidance for the fourth quarter but didn’t provide an outlook for the next fiscal. HCL Technologies Ltd. raised its FY21 margin guidance and revenue growth forecast for the fourth quarter.

According to BloombergQuint’s calculations, the nation’s largest software services exporter is the only company that may surpass 2019-20 revenue at the end of the ongoing fiscal. Others are likely to fall slightly short.

Here’s how TCS, Infosys, HCL Technologies and Wipro fared in the October-December period:

Revenue

All the four companies reported sequential revenue growth in the third quarter on account of higher investments toward cloud computing, artificial intelligence and internet of things, and new deals. Infosys posted the highest 5.5% growth in top line, followed by TCS, Wipro and HCL Tech.

Operating Margin

Work from home and lower travel expenses helped Indian IT firms to post an expansion in margin for the second quarter in a row. While TCS posted the highest margin among peers during the quarter, Wipro saw the biggest jump over the preceding three months.

Deal Wins

TCS reported deal wins worth $6.8 billion during the reported quarter, while Infosys said large deal total contract value was at an all-time high of $7.13 billion.

Wipro in December had signed a $700-million takeover deal with Metro AG that will see more than 1,300 staff of the German wholesaler move to the Indian firm. HCL Tech, in an exchange filing, said it has won 13 transformational deals across industry verticals, including life sciences and healthcare, technology and financial services, but didn’t disclose the value.

Performance In North America

North America continues to be the biggest market for all technology companies. TCS and Infosys have seen more than 5% growth in this market during the quarter.

Financial Services

The banking, financial services and insurance remained the biggest business segment for the IT companies. Infosys saw the highest growth in this vertical among peers. TCS and HCL Tech, however, posted subdued performance.

Outlook

• TCS expects revenue momentum to continue in the fourth quarter.
• Infosys expects its revenue to grow 4.5-5% in the financial year ending March 2021 compared with 2-3% growth forecast earlier. It also raised its operating margin guidance to 24-24.5% against the earlier guidance of 23-24%.
• Wipro expects its IT services revenue to increase to $2,102-$2,143 million in the fourth quarter, indicating 1.5-3.5% growth over the preceding three months.
• HCL Technologies expects revenue in the quarter ending March to grow at 2-3% against 1.5-2.5% guided earlier. It also raised EBIT margin guidance for FY21 to 21-21.5% from 20-21% predicted earlier.