Technology earnings season has kicked off with major IT companies – Tata Consultancy Services (TCS), Infosys, Wipro and HCL Technologies – reporting their third-quarter report card this week, amid analysts’ pessimistic predictions about a slowdown in advanced economies and fear of a geopolitical meltdown – yo ps.
Industry leaders said they are closely watching the global economy and the signals.
Overall, the range of revenue growth for tier 1 IT operators was pegged to be in the range of 14-20% for the third quarter of FY23, compared to the same period last year. From a sequential perspective, underlying growth for the large IT package ranged between three and eight percent versus the prior quarter in September.
Meanwhile, first-quarter December net profit for the largest IT platform rose between three% (Wipro) to 19% (HCL Tech) year over year. And about 4% (TCS) to 17% (HCL Tech) when calculated on a sequential basis.
Total revenue of TCS increased by 19.1% at Rs. 58,229 crore for the reported quarter. The CEO and managing director of India’s largest IT services company, Rajesh Gopinathan, said the company is more confident about its North American and British operations, which account for two-thirds of its revenue, but there is a short-term uncertainty, namely Europe. , which needs to be closely monitored as geopolitical tensions prevent customers from spending on IT.
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TCS management spoke of its “slow” decision-making process in Europe, and said it is “fairly constructive” when it comes to markets like the US, though it is watching closely how things play out over the next couple of quarters. Conversations with customers are more balanced, “both positive and cautious” resulting in “catch-up opportunities for a mix of cost and turnaround deals.”
Chief Operating Officer N Ganapathi Subramaniam said the deal momentum and pipeline look good, and the overall technology spending situation appears healthy even in this environment.
Infosys reported a 20.2% year-on-year increase in consolidated revenue for the December quarter at Rs.38,318 crore, and surprised many by raising its full-year revenue guidance to 16-16.5%.
Infosys’ consolidated net profit increased to Rs.6,586 crore during October-December 2022 from Rs.5,809 crore in the previous year, resulting in an increase of 13.4%. Sequentially, net profit increased 9.4% from the September quarter.
The company raised its annual sales forecast on a strong deal basis, but at the same time warned of “constraints” in certain segments amid the global economic slowdown.
Infosys called out mortgage, investment banking, telecom and high technology, saying these sectors were “most affected, resulting in delays in decision-making and uncertainty in spending.”
However, the company was quick to add that sectors such as energy, utilities, and manufacturing are still seeing momentum.
Moreover, the concerns are more pronounced in Europe than in the United States, said the Bengaluru-based IT major.
“We’re seeing in European markets more concerns about what’s going on with the economy…and the US market is there as well, but to a relatively lesser extent in the US in relation to Europe. We’ll see how that plays out,” Infosys CEO Salil Parekh said during a third-quarter results conference call.
Smaller rival Wipro mentioned a possible slowdown in the retail sector in its earnings report. Management’s talking points also touched on “a bit of a delay in converting bookings” and “a certain level of volatility from customers in certain segments with respect to discretionary spending.”
Wipro Ltd. on Friday reported a better-than-expected 2.8% increase in consolidated net profit for the December 2022 quarter to Rs.3,053 crore and expressed optimism about “strong” bookings for the fourth quarter despite global headwinds.
However, the company’s guidance for the fourth quarter came in below analysts’ expectations. Wipro said its IT services revenue is expected to grow in a range of -0.6% to 1% sequentially in constant currency in the quarter ending March 2023.
Wipro expects revenue from its IT services business for the full year to be in the range of 11.5-12% in constant currency.
Revenue of Wipro was at Rs.23,229 crore in the third quarter of FY23, up by 14.3% over the same period in the previous year.
Noida-based HCL Tech reported a 19% increase in consolidated net income to Rs. 4,096 crore for the third quarter just ended.
Its consolidated revenue grew by 19.56% to Rs.26,700 crore during the said quarter, from Rs.22,331 crore in the December 2021 quarter.
HCL Tech has narrowed its current financial growth guidance in the range of 13.5-14% of total revenue in constant currency and margin terms to 18-18.5%.
C Vijayakumar, CEO, HCL Tech, said: “Looking ahead, we believe there is a near-term impact on a few industries, specifically tech industry customers, as they improve while they will end up with significant growth opportunities in the medium term with The right proposals,” he said.
He added, “Looking ahead, we remain positive about our growth over the medium term, a confidence generated by our good booking and pipeline across each segment.”