In the quarter ended June, the Indian IT sector saw Infosys outpace rivals — such as Tata Consultancy Services (TCS), Wipro, HCLTech, and LTIMindtree — with nearly 4% sequential revenue growth driven by a rebound in the banking, financial services, and insurance (BFSI) vertical.High employee utilisation rates across firms necessitated major recruitment plans, while revenue from Europe declined for most.
GenAI continued to see strong traction. Despite mixed margin performances, cautious optimism for FY25 persists, with expectations of continued demand in BFSI, GenAI, and strategic transformation projects.In Q1, Infosys, TCS, HCLTech, Wipro, and LTIMindtree reported multi-year highs in employee utilisation rates, indicating improved demand scenario. This suggests these companies are nearing their capacity limits and must ramp up hiring to meet demand.
Milind Lakkad, chief human resources officer (CHRO) at TCS, said: “There are skill gaps across the board, from niche to generic. Having said that, our core strategy remains hiring from campuses.” This sentiment was echoed across the industry as firms look to onboard fresh talent to sustain their growth.Major IT firms have announced substantial hiring plans for FY25. Infosys plans to hire up to 20,000 freshers, with a focus on on-campus and off-campus recruitment. TCS aims to hire around 40,000 freshers, having onboarded 11,000 in Q1. HCLTech plans to bring in 10,000 freshers, and LTIMindtree intends to continue aggressive hiring.
Wipro CHRO Saurabh Govil said: “We have seen utilisation going up every quarter. We can believe this is the right time for us to look at the supply side, so that we can have much better conditions.” Net headcount, meanwhile, fell at most IT companies. Infosys’s headcount decreased by 1,908. TCS added 5,452 employees on a net basis, but its overall headcount still dropped by 1,759 sequentially. HCLTech’s headcount decreased by 8,080 due to a divestiture, but excluding this, the headcount stayed flat. LTIMindtree, on the other hand, added 284 employees.
Despite the revenue growth, performance on the margin front varied. Infosys saw its operating margin rise by 100 basis points to 21.1%, driven by Project Maximus, which focuses on margin expansion through efficiency and better pricing. However, Infosys’s net profit fell by 20% sequentially due to the absence of an income tax refund received in the previous quarter.TCS’s operating margin fell by 130 basis points to 24.7% due to wage hikes, while its net profit declined by 3.2%, still beating analyst expectations.
HCLTech’s operating margin decreased by 50 basis points to 17.1%, although its net profit rose 7% to `4,257 crore, driven by higher other income and reduced expenditure.LTIMindtree reported a 30 basis points increase in its Ebit margin to 15%, while its net profit rose slightly, missing analyst expectations by a small margin. CEO Debashis Chatterjee said, “Fiscal 2025 started on a positive note for us… This is attributed to a measured uptick in IT spending for critical initiatives with clients balancing innovation and fiscal prudence.”The BFSI sector showed strong signs of recovery across most IT companies. Infosys’s BFSI revenue grew by 1.1% sequentially, while TCS saw better growth in banking compared to the previous quarter. HCLTech, however, experienced a 60 basis point decline in BFSI revenue, with expectations of further weakness in the next quarter due to a major deal transition.
Manufacturing and life sciences sectors showed mixed results. Infosys reported stable manufacturing revenues, while TCS saw marginal growth in life sciences and healthcare. HCLTech faced declines in manufacturing and life sciences due to project completions and seasonal factors.In contrast, Wipro saw its revenue from BFSI rise 50 bps quarter-on-quarter. CEO Srinivas Pallia said: “Banking and Financial Services retained its positive momentum from last quarter and we have now seen growth in this sector for two consecutive quarters.”
Geographical performance in Q1 highlighted a trend of declining revenues from Europe, except for LTIMindtree. Infosys’s revenue from North America fell by 0.7%, while Europe saw a 0.2% decline. TCS experienced a 50 basis points drop in North American revenue and a 20 basis points decline in Continental Europe. HCLTech’s revenue from Europe fell by 100 basis points, while North America showed an 80 basis points increase.LTIMindtree bucked the trend, with a 4.4% increase in North American revenue and a 1% rise in European sales.
“We expect the market to follow this path for FY25, where the focus will continue to be on cost takeout, but also on select high-priority transformations,” said LTIMindtree’s management.GenAI is emerging as a significant growth driver for these IT firms. TCS highlighted a strong pipeline of $1.5 billion in GenAI deals, up from $900 million in the previous quarter. Infosys, in its annual report said it has 50 active GenAI projects and is in discussions with over 300 clients about it. HCLTech and LTIMindtree also noted increased client interest and multiple ongoing GenAI engagements.
TCS CEO K Krithivasan said: “Any new technology that comes in, we overestimate the impact on the short term and underestimate its long term impact. And the same thing is happening in AI.”The managements of these IT firms appear to be cautiously optimistic as they refrained from commenting on estimated recovery timelines in discretionary spending. They said there have been pockets of recovery with clients becoming more open to spending on critical and large transformation projects. Technology spending is also being seen in generative AI proofs of concept and projects.
“There’s nothing new to add in terms of market sentiment. However, as mentioned last quarter, we believe it will be a stronger FY25 compared to FY24,” Krithivasan said. As for Infosys, it increased its revenue growth guidance for FY25 to 3-4% from the previous 1-3%. CEO Salil Parekh, said: “If you look at the first quarter, our year-on-year growth has been 2.5%… That is a one-off. We have always maintained that our H1 is going to be better than H2, and the guidance shows that. And then there is the revenue from in-tech (a firm acquired by Infosys).”
HCLTech has retained its full-year revenue growth guidance of 3-5% in constant currency terms. The firm’s CEO and MD C Vijayakumar said: “We have not factored any significant pick up in discretionary spends. Our assumption is this year will be the same as last year… Though we see some actions which indicate that things could have bottomed out.”Wipro, too, raised its sequential growth guidance to -1% to 1% in CC terms. This comes after the company slashed its guidance last quarter to -1.5 to 0.5% . “We’re still not seeing a significant change in the demand environment. We see clients still cautious and the discretionary spend is low. However, we have seen an uptick in the consulting through Capco, BFSI, and consumer sectors in the US,” said Wipro CEO Pallia.