How’s Q2 FY25 for Indian IT Majors: Gearing up for the AI First Era

The quarterly results of India’s top tech commune – TCS, Infosys, Wipro, Cognizant, Tech Mahindra and HCL Tech serve as the Indian IT industry’s barometer. Cognizant (though US-based has its roots in India). If one looks at the Q2 FY 25, these companies showed resilience amid global economic headwinds, rode on the tailwinds and sustained the momentum.

Beyond the numbers and optimism, as you look at scaling the topline with a positive bottom line, Q2 had its share of challenges and one commonality one saw was that despite the modest growth they were able to build competencies to sustain if not grow, and scale with speed. Given the tech disruptions like Gen AI reshaping the way enterprise IT is done, the emphasis is more on gearing up for the future so that they can carve out differentiators in the crowded IT services space, and build AI competencies. Also one need to acknowledge companies like Coforge, LTIMindtree and a plethora of tier 2 players are giving a tough competition to the bigger players in the fray.

Q2 at a Glance

TCS: Posting a revenue of Rs 64,259 crore, TCS secured a 7.6% YoY growth. It secured a 5% rise in net profit, at Rs 11,909 crore. What worked was a good uptick from the Energy, Resources, and Utilities vertical that mustered a 7% increase YoY. Thanks to the strong demand for digital transformation in these segments.  The spoiler for TCS in Q2 was the Communication & Media segment with a 10.3% decline compared to the corresponding quarter last year, signalling a slowing down on IT spending in this segment.

But the fine print here is except Communication & Media segment and growth from regional markets, other segments saw only very minimal revenue increase YoY. Despite that TCS’s diversified portfolio of services and traction from regional markets helped it to sail through the quarter. If we look at regions performance for TCS, India secured  95.2% growth, followed by Middle East & Africa (7.9%), APAC (7.5%), and Latam (6.8%). In terms of composition of revenues, North America contributes 47.6% while India stands at 8.9%.

Infosys: If we look at Infosys, Q2 saw 5.1% YoY revenue growth with Q2 revenues, reaching Rs 40,986 crores. Net profit for the quarter climbed to 4.7% YoY – in revenue terms it's  Rs 6,506 crore.  The reading here is the company was able to better manage costs and drive profitability​ as compared to the competition and well-balanced sectoral revenue spread.

Wipro: With a 1% dip in revenues, Wipro’s Q2 stood at Rs 22,302 crore. An impressive 21% revenue year-on-year rise in net profit for Q2 FY25, reaching  Rs 3,209 crore. The company attributes it to strong execution and margin improvements. Wipro also had a large deal booking of over $1.49 billion and bettered its operating margins to 16.8%.

HCLTech: Overall revenues for Q2 were at Rs 28,862 crore – an 8.2% YoY growth. Net profit increased by 11% at Rs 4,235 crore. What worked in the company’s favour was improved EBIT margins, good growth from HCL Software , coupled with demand for Data & AI, Digital Engineering, and SAP migration services.

Tech Mahindra: The big story here is the impressive net profit soaring by 153% year-on-year to Rs1,250 crore. Overall revenue grew by 3.5% year-on-year, reaching Rs 13,313 crore. Deal wins stood at $603 million during the quarter driven by segments such as BFSI, retail, and transportation. The exception is that communications remained a weak spot.

Cognizant: It follows the calendar year, and looking at its Q2 numbers (AMJ 24), it secured a sequential growth of 2.1% in constant currency on a revenue base of $4.9 billion driven by strong performance in the Financial Services and Health Sciences sectors. Third quarter revenue is projected to range between $4.89 billion and $4.96 billion, reflecting a potential decline of 0.2% to a growth of 1.3%, or a flat to 1.5% increase in constant currency terms.

What Lies Ahead – Q4 and Beyond?

While the IT majors gear up for turbulent times – both from geopolitical and disruptive technologies, one of the key areas that need to be watched is how their investments in AI will further help build business and technology delivery. Companies like TCS, Infosys, and HCLTech have managed modest growth, while others, including Wipro and Tech Mahindra, are showing mixed signals. But overall strong profitability gains show increasing operational efficiency and margins.

But given the time and age, the time has come for us to look beyond short-term financial metrics and look at how these companies are reinventing their global delivery models tuned for technology excellence and transformation. While AI is opening up a plethora of new opportunities, it is to be seen if will it eliminate jobs as we move ahead.

What does Q2 FY 25 foretell the way forward for Indian IT? Certain segments will face  headwinds and to deepen the cadence, service providers need to reinvent their offerings for them by giving more bang for every dollar spent.

In the end, one theme that will predominantly escalate in Q3 FY 25 is the companies’ ability to walk the innovation talk and offer solutions based on a problem-solving approach powered by emerging tech like AI. The challenge here will be to evolve their global delivery models in a way that balances technology transformation with the need to address the changing demands of clients.