Robust demand from enterprise clients for cloud, data analytics and cyber security has resulted in an overall optimism in the IT sector with major players like Infosys and Wipro announcing a hike in margins and revenue guidance.
Infosys has revised its revenue growth guidance for FY21 in the range of 4.5-5% in constant currency terms and operating margin 24-24.5% whereas Wipro expects a sequential revenue hike in the range of 1.5-3.5% for Q4, FY21.
Both the firms reported some of the largest deal-wins in their history during Q3 as well as cuts in discretionary spending which led to expansion in the operating margins. While Infosys continued to best its peers in the IT industry with deals worth a huge $7.13 billion during the quarter, rival Wipro said it is on the path of a growth trajectory and will catch up with its peers in the next few quarters.
Infosys continues strong deal momentum
Huge deal wins by Infosys across verticals like manufacturing, financial services and communication have placed the Bengaluru headquartered firm ahead of others which the CEO, Salil Parekh, attributes to the company’s investments in digital capabilities before the COVID pandemic. Parekh, who completed three years as CEO in January, said the firm has been able to achieve its target of clocking more than 50% revenues from digital, which will continue to increase for the coming quarters.
Parekh is also credited with some of the biggest deal wins including the over $3 billion multi-year contract with German auto major Daimler as well as a $1 billion deal with US investment firm Vanguard. The Infy board also awarded stock units worth Rs 3.25 crore to Parekh. “With the intense focus on client needs and the comprehensive foundation built on differentiated capabilities, I remain confident about the future,” he said.
The company’s net profit gew by 16.6% YoY to Rs 5,197 crore. The sequential revenue hike for the quarter was an 8-year high at 5.3% at Rs 25,927 crore. The Q3 operating margin stood at 25.4%, a YoY increase of 350 basis points. The IT services provider also announced the acquisition of Australian design firm Carter Digital for an undisclosed amount.
Wipro’s focus on linear structure to drive growth
The management rejig at Wipro has paid off with the IT services provider announcing major deal clinches for Q3, FY21 which resulted in the net profit rising by 21% to Rs 2,968 crore whereas the gross revenues for the quarter grew by 3.7% sequentially at Rs 15,670 crore. The IT services operating margin was 21.7%, an expansion of 329 bps YoY.
Wipro’s CEO Thierry Delaporte who took charge in June last year said that the company has performed well across all the geographies as well as verticals and will stay focused on the linear organisational structure model. The company’s attrition remained flat at 11%.
“We are driving the trajectory for Wipro without comparing it to competitors. We are aware that we have grown less than others. We restored growth in Q2 and are accelerating in the next quarters. We will continue to make investments to grow faster and a lot of talent is being inducted in the organisation. The demand environment is steadily improving, especially for digital
transformation, digital operations and cloud services. I am also pleased to share with you that we have moved into our new organization structure and are stabilizing quickly,” Delaporte added.