Indian software services providers Infosys and Wipro have issued revenue forecasts that fell short of analysts’ expectations, signaling that a broad-based recovery in global tech spending has not yet materialized. US-listed shares of Infosys, which had risen over 35% in the past six months, dropped 2.5% following a second-quarter profit miss due to increased costs. Wipro’s shares experienced a similar decline.
While Indian IT firms have benefited from increased spending by the banking, financial services, and insurance (BFSI) sectors, which make up about a third of their revenue, other industries have yet to loosen their budgets. Infosys CEO Salil Parekh pointed to signs of potential future growth, noting that while financial services spending has increased, broader recovery across other sectors remains elusive. His comments come after Tata Consultancy Services also flagged weakness in the US market.
Infosys reported its best BFSI growth in seven quarters and adjusted its full-year revenue forecast to 3.75%-4.5%, up from 3%-4%, but kept its margin outlook at 20%-22%. Despite these gains, analysts had anticipated higher revenue forecasts for both Infosys and Wipro. Wipro’s third-quarter revenue is expected to range from a 2% decline to flat performance.
Infosys’ second-quarter revenue grew 5.1%, slightly exceeding the 4.7% expected by analysts, though its profit of 65.06 billion rupees fell below the projected 68.06 billion. Analysts praised Infosys’ strength in North America but expressed concerns about the company’s peers, citing ongoing caution about discretionary spending.
Wipro saw modest growth in its BFSI segment for the first time since March 2023 and reported a revenue increase in the US and Canadian markets. However, overall revenue fell 1%, slightly better than analysts’ forecast of a 1.1% decline. New leadership at Wipro may cause its recovery to lag behind competitors.
Other IT firms also saw mixed results. LTIMindtree’s revenue rose 5.9%, narrowly missing analysts’ estimates, while HCLTech raised its full-year revenue forecast, underscoring the ongoing challenges facing India’s IT sector amidst global market uncertainties.
