Q1 FY25 results: How India's Top IT firms have performed

India's top six software services providers, including Tata Consultancy Services (TCS), Infosys, HCL Technologies, Wipro, and Tech Mahindra, recently released their financial results for the quarter ended June 2024. Here’s an analysis that includes their performance, verticals that gained, hiring and attrition rates, and guidance in FY25 that can have an impact on India's $250 billion software export industry on the whole. Here’s a recap of their recent developments.
Performance Overview

The Q1 performance of top five IT services firms was a mixed bag. TCS, India's leading IT services company, reported a 5.4% year-on-year (YoY) increase in revenue and a significant rise in net profit for Q1 FY25, driven by major deal executions. Infosys, the second-largest IT firm, saw a 7.1% YoY rise in net profit to ₹6,368 crore and a 3.6% increase in revenue to ₹39,315 crore. 

HCLTech, the third-largest, achieved a 20.4% YoY increase in net profits with a 6.7% revenue rise, although its sequential revenue growth declined by 1.6%, while, Wipro reported a 5.9% sequential net profit growth, but its gross revenue fell by 1.1% quarter-on-quarter (QoQ) and 3.8% YoY. Tech Mahindra's profit increased by 29% sequentially, following an exceptional loss in the previous quarter. Infosys has surpassed its closest competitors in metrics such as constant currency (CC) revenue growth.
 
Despite varied results, total contract values (TCV) remained strong, with TCS reporting over $8 billion in TCV — twice that of Infosys and nearly triple Wipro's wins. HCLTech's TCV was below $2 billion, while Tech Mahindra’s reached $535 million, up from $500 million in the previous quarter.
 
Spending Trends in Key Verticals
 
In the April-June quarter, green shoots were visible across these companies in the BFSI space, especially in North America. Both the vertical and the geography account for over 40% and 50-60% of the revenues for all four IT firms including TCS, Infosys, HCL Tech and Wipro, respectively, barring Tech Mahindra.

Though still reporting negative growth in most cases, the management of these five companies believes that the BFSI vertical will continue to grow.
 
The Role of AI and Emerging Technologies
 
Spending on Generative AI (GenAI) has not yet gained momentum, causing a delay in the recovery of the sector. Despite numerous proof of concept (PoC) projects in GenAI, they have not yet resulted in contracts for IT services firms, at least in the quarter ended June 2024. Significant spending is expected to occur as customers’ transition from PoCs to larger projects.
 
In the previous month, Accenture, the world's largest technology services firm, announced $2 billion in GenAI contracts for the first nine months of the company's fiscal year. Indian companies are still solidifying their AI strategies and do not disclose AI victories separately.
 
Hiring and Attrition Rates
 
TCS has added 5,452 employees for the April to June quarter, bringing its total employee count to 606,998. On the other hand, Infosys has reported a reduction in employee numbers for FY25, with a headcount falling by 1,908 from the previous quarter and a decline of 20,962 employees over the past year, bringing the total workforce to 315,332 as of June 2024.
 
Wipro has expanded its team, increasing its headcount by 337 for the quarter ended June 2024, reaching a total of 234,391. HCLTech witnessed a substantial drop in its employee count by 8,080 for the three-month period ending June, while Tech Mahindra saw a sequential addition of 2,165 employees, raising its total headcount to 147,620.
 
TCS is planning to hire 40,000 freshers in FY25, while Infosys aims to recruit around 20,000. Overall, the top tech companies in India are looking to hire close to 90,000 freshers in FY25.
 
Outlook for Indian IT Firms
 
Analysts and industry leaders have shown optimism for the upcoming fiscal quarters despite global IT spending caution. Gartner projects global IT spending will reach $5.26 trillion in 2024, a 7.5% increase from 2023, slightly below the previously forecasted 8%. Companies are addressing a backlog of contracts, leading to subdued growth in Q2 but a pickup in the latter half of the fiscal year is anticipated. 
 
Infosys has raised its revenue growth forecast for FY25 to 3-4% in constant currency, driven by the acquisition of In-Tech and strong Q1 earnings, maintaining an operating margin forecast of 20-22%. HCLTech expects a constant currency revenue growth of 3-5%, with Wipro predicting growth in the range of -1% to +1%.
 
The last two-quarters of FY25 may see a resurgence in spending and AI initiatives, although cost-saving measures like vendor consolidation are prevalent among customers. Amid global uncertainty, customers are adjusting contracts, and the rise of global capability centres (GCCs) could impact outsourced business opportunities while benefitting local employment.