The IT Index saw deep cut in trade on Friday with Infosys shares registered the biggest dent as the street worried about the sustainability of its revenue trajectory. While announcement of TCS Q3 results cheered the market on hopes of a revival in IT deal spends, the expectation that Infosys may have a muted Q4 was decidedly a party pooper.
Comparing the performance of the two major tech belwether in India, DD Mishra, VP Analyst, Gartner highlighted that “TCS and Infosys have both managed to grow in a difficult environment while protecting their margin growth. Although discretionary spending is under pressure and has been below our expectations, but overall, we still anticipate that IT Services spending will grow as per our forecast.”
Here is a quick look at some of the key metrics and how both companies fared on these counts-
Infosys vs TCS: Discretionary Spend
In case of Infosys, the upward revision in the FY25 revenue guidance was primarily on the back of a faster recovery in discretionary spends across the BFSI, retail and consumer verticals. According to the management, the focus is more on cost-takeout deals than on discretionary spends. However, they are positive about the outlook for near-term discretionary spend.
TCS meanwhile maintained that there is improvement in discretionary spending and shorter deal cycles. BFSI and telecom are the two sections that they are expecting meaningful improvement in discretionary spend.
Comparing the performances of both Infosys and TCS in Q3, Siddhartha Khemka, Head of Retail Research, Broking and Distribution at Motilal Oswal Financial Services outlined that, “Infosys Q3 headline numbers were strong but revenue was generated primarily by passthrough so it has led to a doubt in the investor’s mind about the sustainability of the revenue trajectory. There are expectation of revenue decline in Q4, about 1% dip QoQ. The market is cautious as a result. Infosys may remain subdued for next quarter.”
Infosys Vs TCS: Deal Pipeline
Infosys management indicated that the company is seeing better client traction in for enterprise AI capabilities, particularlygenerative AI. This as a result helped the tech major clock strong large deal wins and healthydeal pipeline. However, the small deal pipeline is a bit of worry spot.
Q3 has been a maquee quarter for TCS. Its been a first 3 quarters that the total deal value surpassed $10 billin. It has won deals worth $10.2 billion in Q3. Sequentially this is significantly better than the $8.6 billion deals in Q2 and almost similar value of deals it recorded in same quarter last fiscal.
Infosys Vs TCS: Hiring
Infosys has increased its headcount for the second quarter on the trot in FY25 and expects significant addition of freshers in the next financial year too. According to Jayesh Sanghrajka, Chief financial officer (CFO), Infosys “over 20,000 freshers” will be hired in FY26. For FY25, the company stated that they are on track to reach the 15,000 hiring target for freshers.
TCS’ headcount is at 6,07,354 including the hirings of Q3FY25. That apart the company also promoted over 25,000 associates. Though no specific figure was shared, TCS said that the campus hiring is progressing as per plan.
Infosys Vs TCS: Attrition
The attrition rate of Infosys came in higher at 13.7% for Q3 Vs 12.9% in Q2. Even compared to Q3 of the last fiscal, it was a higher tick. Meanwhile TCS reported a reduction in employee count in Q3. It reported a reduction of 5370 employees. Attrition for the quarter also reached 13% Vs 12.3% in Q2.
TCS Vs Infosys: Expert take
Given the “uncertainty prevailing”, experts believe that both companies need to recalibrate their strategy due to the geopolitical changes.
Khemka pointed out that, “The commentary from Infy is cautious on discretionary spend Vs peers like TCS. That’s a divergence. Wage hike impact will be seen in Q4 margins, that may create some headwinds. The big picture is positive. 20-22% margin guidance strong, large deal wins and deal pipeline strong . These are positive for Infosys and it will benefit from medium term discretionary spend. Its a long-term positive and as a result we have a Buy rating with price target of Rs 2200/share. The management commentary more encouraging by TCS. Over the near-term also TCS is marginally better poised.”
Mishra added that “TCS demonstrates vision in how it intends to help its clients in the future of industries and work. While Infosys provides next-generation digital services and consulting and ranks in the top 15 in IT services market share with sustained growth that shows the value it delivers to organizations. Both organizations are engaged in value-driven engagements, but their approaches vary. TCS’s strategy revolves around customer-centric growth, leveraging its capabilities to scale growth and transformations by nurturing its clients toward driving reliability and certainty. On the other hand, Infosys believes in disruptive changes through energizing the core, AI-driven agility, reskilling, and localization.”