TWILTCH revenue growth remains sluggish in the first quarter of 2023

The TWILTCH providers (Tech Mahindra, Wipro, Infosys, LTIMindtree, TCS, Cognizant, and HCLTech) represent the leading India-heritage IT and business process service providers. To that end, their financial results are often considered a good indicator of how the wider market is performing. The latest quarterly results show a continued decline in revenue growth. We delved into each provider’s recent financial reports¹ and found:

• Tech Mahindra: In Q1 2023, Tech Mahindra’s year-over-year (YoY) revenue growth slowed further from 8.8% to 3.7% vs. the previous quarter. The slowdown occurred across industries and geographies. The most impacted were Europe; technology, media, and entertainment; and BFSI.
• Wipro: Wipro’s YoY revenue growth is also on a downward trajectory, decreasing from 8.4% to 6.2% to 3.6% in Q3 2022, Q4 2022, and Q1 2023, respectively. Energy, natural resources, and utilities grew by 10.8%. The rest of the regions and business lines reported slower growth.
• Infosys: Infosys’ YoY revenue growth also continued to slow. In Q1 2023, revenue grew by 6.4%. There was a notable slowdown in the financial services, communication, and high-tech industries and across all regions except Europe.
• LTIMindtree: The recent LTI and Mindtree merger puts LTIMindtree in a coveted spot on the list of industry titans. Not surprisingly, the smallest TWILTCH company reported double-digit YoY growth in revenue at 11.9%; however, it is lower than its previous quarters. Notable slowdowns in growth occurred in high-tech, media and entertainment, health and life sciences, and public services industries.
• TCS: TCS’ revenue slowed the least compared to its peers. Its year-on-year revenue growth in Q1 2023 was 7.5% vs. 8.4% in the previous quarter. Revenue growth slowed in its biggest market, North America.
• Cognizant: Overall revenue plateaued at around $4.8 billion with a small decline of (-0.3%) YoY, essentially flat growth. Slowdowns are noted in all regions and across business divisions, with the most notable in the financial services industry (-3.4%).
• HCLTech: Year-on-year revenue growth slackened to 8.1% in Q1 2023 from 11% in Q4 2022. The drop in growth was driven primarily by technology and services, while growth in financial services and healthcare and life sciences picked up. Growth is stable in its biggest markets, the Americas and Europe, but has fallen in the rest of the world.

The Bottom Line: Enterprise spending is being carefully calibrated in the volatile and challenging macroeconomic conditions, leading to a continued decline in the revenue growth of major Indian IT service providers post the pandemic boom.

The TWILTCH companies’ revenue growth rates are normalizing after the pandemic boom; the TWILTCH average revenue growth was 18%+ in Q1 2022. Enterprises seek greater flexibility, resilience, a foundation for growth, and faster ROI. At the same time, there is a growing trend of redirecting savings from efficiency, cost, and consolidation opportunities from current projects to fund new transformation deals. Enterprises need to stay agile and adapt to leaner and more sustainable business models to survive and gain a competitive edge in the era of fast-evolving market conditions. Competition to be the service partner of choice is only getting hotter.

(1) Revenue and growth data represents HFS estimates based on analysis of publicly available information. The year-over-year growth compares a quarter with the same quarter the previous year.
Source: HFS Research and earnings reports of leading service providers, 2023

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