Key highlights:
Over the last month, India’s top IT firms have announced their quarterly results for FY 24. A quick look at the results show flat to negative growth in revenue for the fiscal year. However, margins for most firms have remained stable or increased in FY 24 over the previous year.
Uncertain macro environments in key markets such as the US and Europe and conflicts in Europe and the Middle East are some of the reasons behind the weak discretionary spend from enterprises. Large customers key verticals, such as BFSI, Retail and Hi-tech, are being cautious on tech spend, thereby resulting in muted growth for IT outsourcing players.
Given the challenges in mature markets, IT companies are looking to expand their presence in Middle East and Asia Pacific. Market such as Japan have consistently outperformed other mature markets in terms of growth.
Inorganic growth remains one of the key levers of growth, especially in terms of adding new capabilities in the next-gen gen technologies such artificial intelligence and machine learning.
Cautious future outlook despite strong orderbook:
Despite increased deal wins in FY 24, companies have reduced their revenue projections for the next 12 months. For example, Infosys has reduced its revenue growth guidance to 1-3% from 4-7% previously for FY 25, despite securing contracts worth $17.6b in FY 24.
In general, IT companies are remaining cautious about the outlook in 2024-25 as they wait for US and European markets to recover.
Europe has been the target market for several large acquisitions over the past 12 months, and reflects a strategic pivot towards this region due to its faster growth compared to North America. Infosys acquired in-tech, a German automotive industry focused firm for $480m; Wipro acquired Capco for $1.45b to enhance its BFSI capabilities.
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