In charts: How India’s IT giants fared in Q3, on wage costs, topline, and deals

First, the financials. Quarterly results from Tata Consultancy Services (TCS), Infosys, HCL Technologies, and Wipro—released last week—reveal that revenue growth remains tepid. While the December quarter traditionally sees slower momentum due to seasonal furloughs and fewer working days, year-on-year figures also failed to inspire.

The combined revenue growth for the top four players has struggled to exceed 3% in any of the last seven quarters, slipping further to just 1% in the December quarter. TCS and HCL Tech both reported a drop in year-on-year revenue growth, with TCS at 5.6% and HCL Tech at 5.1%. Infosys posted an improvement, with revenue growth rising from 5.1% to 7.6%, while Wipro reported a marginal increase in topline after five consecutive quarters of contraction.

Net profit figures offered some optimism. TCS reported its strongest gains in six quarters, Infosys reached a three-quarter high, and Wipro hit at least a two-year peak. Sequentially, too, net profits improved for all except Wipro.

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Looking ahead, the sector anticipates a potential rebound in the final quarter of the fiscal year. Three of the four companies have raised their revenue guidance for 2024-25, citing improvements in discretionary spending by clients.

Headcount woes

Rising attrition emerged as a key theme in the latest quarterly results of India’s IT majors. 

Attrition rates for all four companies—measured as the percentage of employees leaving over the past 12 months—reached their highest levels in at least four quarters. Wipro led the pack with an attrition rate of 15.3%, followed by Infosys at 13.7%, HCL Technologies at 13.2%, and TCS at 13%. While these figures remain well below the 20%+ rates seen in 2022, they highlight a persistent challenge for the sector.

Net workforce addition also slowed significantly. The four companies collectively added just 1,198 employees during the quarter, a steep decline from the 6,900 added in the previous quarter. TCS and Wipro reported net losses of 5,370 and 1,157 employees, respectively, in the December quarter.

At the same time, employee costs as a share of revenue fell across the board. HCL Technologies and Infosys reported the most significant reductions, with wage costs dropping to 55.5% and 51.3% of revenue, down from 57.2% and 52.6% in Q2. TCS reported a modest decline from 57% to 56.2%, while Wipro saw a slight reduction from 60.4% to 59.9%.

Year-on-year, too, TCS, Infosys, and Wipro reported declines, while HCLTech recorded an increase. Looking ahead, Infosys plans to hire over 20,000 freshers in 2025-26, while TCS continues its trainee onboarding programme.

Absent deals

A persistent challenge remains the scarcity of mega contracts. Both Wipro and Infosys reported lower total contract values (TCV) in the third quarter compared to the prior year, underscoring the impact of subdued large-scale deal activity across the sector. TCS, however, stood out, posting a 26% year-over-year increase in TCV, bucking the broader trend.

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The lack of mega deals was evident in the companies' high-value clients, signalling that global customers exercised caution on large IT projects during the December quarter. An analysis of clients generating over $100 million in annual revenue shows stagnation in recent quarters, with both TCS and Wipro reporting quarter-on-quarter declines in this segment. However, TCS maintained year-over-year growth in its high-value client portfolio.

The Indian IT sector is navigating a period of uncertainty, with global economic factors weighing on demand. Given the industry’s significant exposure to the US market, policy shifts under the new US administration will be closely monitored for their potential impact on client spending and deal pipelines.