Deciphering India's IT Giants: TCS vs. Infosys Q3 Face-off! #techshowdown #earningsreports

MUMBAI - The earnings season for India Inc. as well as the information technology sector kickstarted with industry leaders Infosys and Tata Consultancy Services on Thursday.

The December quarter is typically a seasonally weak period for the IT sector, but it got worse by the continued slowdown in the US and Europe, which form the largest part of revenue for software services exporters.

The overall earnings of Infosys and TCS for the December quarter reflected the slowdown in the business environment.

Let’s see how the tech giants performed on some of the key parameters in the third quarter.

PAT/Revenue
TCS reported a 2.5% sequential drop in consolidated net profit for the quarter to Rs 11,058 crore, whereas Infosys saw a 1.7% decline to Rs 6,106 crore.

TCS’ revenue increased 4% sequentially to Rs 60,583 crore, whereas that of Infosys declined 0.4% to Rs 38,821 crore.

In constant currency terms, TCS’ revenue grew by 1.7% year-on-year (YoY), whereas that of Infosys declined by 1%.

Operational Performance
The earnings before interest and taxes or EBIT margin for TCS expanded by 70 basis points sequentially to 25%, on the back of a higher focus on execution and operating efficiencies.

On the contrary, Infosys saw its profitability contract 70 bps sequentially to 20.5%, due to the impact of wage hikes and furloughs.

Despite this, Infosys retained its margin guidance of 20-22% for the current financial year ending March 2024.

Deal Wins
In the December quarter, deal wins slowed down for both TCS and Infosys, but the latter saw a bigger impact.

TCS bagged deals worth $8.1 billion in Q3, lower than the $11.2 billion worth of deals it bagged in the September quarter.

Meanwhile, Infosys bagged large deals worth $3.2 billion in the December quarter, which was still less than half of what it bagged in the September quarter.

BFSI Performance
Banking, financial services, and insurance (BFSI) is the largest vertical in terms of revenue for both TCS and Infosys.

TCS, which gets about 37-38% of its revenue from the BFSI vertical, saw revenue drop by 3% in the quarter. This is the largest vertical for the company.

Infosys, on the other hand, saw a steeper 6% drop in revenue from this vertical in constant currency terms. Infosys gets about 28-29% of its revenue from BFSI vertical and is also the largest for the company.

Attrition
Infosys saw attrition for the last twelve months come down sharply to 12.9% in the December quarter from 14.6% in the September quarter.

For TCS, the attrition came down to 13.3% for the last twelve months, from 14.9% a quarter ago.

Ahead of the announcement of their earnings, TCS shares ended 0.6% higher on the National Stock Exchange at Rs 3,735.55, whereas those of Infosys were the worst hit on Nifty 50, ending 2% down at Rs 1,494.20.