Digital transformation deals, AI projects drive revenue for top 5 Indian IT firms Q2

The Q2FY25 performance of the top five Indian IT services firms (TCS, Infosys, HCL Tech, Wipro, Tech Mahindra) indicates that large digital transformation deals and growing interest in generative artificial intelligence (GenAI) are driving revenue growth.

TCS highlighted several significant deals in the retail sector, including partnerships with Primark, McDonald's, and Croma, focusing on digital and business transformation rather than traditional cost-efficiency contracts. According to ICICI Securities, TCS’ large digital deal announcements in Q2 more than doubled compared to Q1FY25, reflecting sustained growth in the retail vertical.

In the Indian market, TCS has benefited from a ₹15,000-crore BSNL deal, while demand for cybersecurity has also increased as clients enhance their security frameworks. TCS Interactive reported increased spending as businesses sought to leverage data and technology for improved marketing returns. TCS is engaged in over 600 AI projects, with an AI and GenAI pipeline valued at $1.5 billion.

Infosys announced a 5% year-on-year revenue increase to ₹40,986 crore for Q2FY25, driven by large digital transformation deals and growth in cloud and GenAI initiatives. CEO Salil Parekh noted a broad-based growth of 3.1% quarter-on-quarter, primarily in financial services. The net profit rose by 2.2% to ₹6,506 crore, supported by large deal ramp-ups and cost optimisations. The total contract value of large deals for Infosys amounted to $2.4 billion, including a significant contract with Metro Bank for enhancing IT functions and a partnership with Belgium's Proximus.

Tech Mahindra reported a consolidated profit after tax of ₹1,250 crore for the quarter ended September 30, a 153.1% increase year-on-year. The company revealed a strategic partnership to boost GenAI adoption and digital transformation across Mahindra & Mahindra, while also collaborating with Horizon3.ai to enhance its cybersecurity offerings. Tech Mahindra launched ‘TechM VerifAI’ to help enterprises validate AI and GenAI project outcomes.

HCL Technologies too reported an 8.2% revenue increase to ₹28,862 crore in Q2 FY25. CEO C Vijayakumar highlighted a robust pipeline focused on data and AI, digital engineering, and efficiency programs, noting several digital transformation deals including an expanded partnership with Xerox.

Wipro's CEO Srini Pallia announced two large deals won in the quarter, with one involving a total outsourcing arrangement that integrates product development and IT operations using GenAI solutions. Wipro has trained over 44,000 employees on advanced AI, establishing account-specific academies for talent development. The company’s strategy includes AI-led, AI-infused, and AI-powered projects tailored to industry-specific challenges, contributing to a record $1.5 billion in large deals. 

The IT firm also said last year that it is investing $1 billion over three years in AI initiatives and has partnered with IIT Delhi to launch a Center of Excellence in GenAI for research and development.

According to Gartner analysts, with IT companies unanimously betting big on GenAI demand, the management consulting major had also revised its IT spending forecast for the second quarter of calendar 2024.

The Q2 results of these IT firms also indicate a positive shift, particularly on the back of increased discretionary spending in the banking and financial services sector. However, concerns about the macro-environment amid the ongoing geopolitical crisis posed a challenge.

Phil Fersht, the CEO of the research firm Horses for Sources, further emphasised that service providers focused on enhancing enterprises' AI capabilities will uncover new opportunities for growth and profitability in the coming quarters.