Big Tech’s Revenue Soars, Indian IT Plummets

The tables have turned . While the revenue of big tech (MAANG) seems to be improving, Indian IT (WITCH) succumbs to losses. This week, in the first quarter earnings, the big tech’s combined revenue stood at?41 percent , whereas Indian IT saw a dip in its fourth quarterly result, and experts believe that the resurgence of the IT service sector will most likely happen in the?next two quarters.

Big tech’s growth rates have surged once again, thanks to aggressive cost-cutting measures that included?layoffs and job cuts , alongside?shutting down less profitable initiatives . This impressive financial performance has instilled confidence among investors on?Wall Street . Now, investors are bracing for the tech industry’s upcoming shift in financial focus – an anticipated surge in spending to capitalise on?Generative AI boom .

On the other hand, Indian IT has been a little laid back on cost-cutting measures and has not laid off its employees. Majority of companies are continuing to?invest in upskilling and research initiatives . Like big tech, they too are betting big on?Generative AI , developing PoCs and solutions – and not just products – for its customers across sectors, and believe that it would reap?significant revenue in the coming quarters.

Here’s a quick glimpse of Indian IT’s poor Q4 performance:?

• In FY23 Q4, most companies, including TCS, Infosys, HCL, Wipro and Tech Mahindra experienced lower-than-expected growth in their revenue, despite reporting higher revenue compared to the same quarter the previous year.?For instance, TCS earned INR 59,162 Cr (16.9% YoY), Infosys earned INR 37,441 Cr (16% YoY), HCL earned INR 26,606 Cr (17.75% YoY), Wipro earned INR 23,190 Cr (11.20% YoY), and Tech Mahindra earned INR 13,718 Cr (13% YoY).?
• Even the constant currency (CC) revenue for most companies in FY23 Q4 was down despite the weakened rupee value.?For example, Infosys experienced a 3.2% decline with $4,554 million, HCL witnessed a 1.2% drop with $3,234.6 million, and Wipro reported a 0.6% fall with $2,831 million. Tech Mahindra’s CC revenue remained the same with $1,668 million.?
• For most IT companies the margins declined primarily due to the banking crisis, which affected the BFSI vertical.?For example, TCS’s margin decreased from 25% to 24.5%, Wipro’s margins fell from 17% to 16.3%, and Tech Mahindra's margins declined significantly from 13.2% to 11.2%. On the other hand, Infosys and HCL’s margins increased from 20.5% to 21% and 18% to 18.2%, respectively.?
• On the attrition front, most IT companies saw a downward trend.?TCS's attrition rate fell to 20.10% (from 21.30% in Q3FY23), Infosys's attrition rate decreased to 20.90% (from 24.30% in Q3FY23), HCL's attrition rate dropped to 19.50% (from 21.70% in Q3FY23), Wipro reported a 19.2% attrition rate (LTM basis), and Tech Mahindra's attrition rate declined to 15% (from 17% in Q3FY23).
• Most IT companies also witnessed a decline in new deals in their latest financial results due to macroeconomic uncertainty, caused by slow decision-making and client spending cuts.?For example, Infosys experienced a decrease of $2.1 billion (down 36% QoQ), HCL's new deals dropped by $2.07 billion (down 11% QoQ), Wipro witnessed a decline of $4.1 billion (down 5% QoQ), and TechM's new deals decreased by $582 million (down 27% QoQ). However, TCS reported a significant increase in new deals by $10 billion (up 28% QoQ).

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