IT firms clock robust deal wins in Q3 despite headwinds

Indian IT services companies clocked robust deal wins in a seasonally weak quarter amidst persisting macro challenges. A majority of IT majors saw their deal win total contract value (TCV) grow from the last quarter. 

Infosys’ large deal TCV was the strongest in the last eight quarters at $3.3 billion, from $2.7 billion in the last quarter. Similarly, Wipro’s total booking stood at $4.3 billion, a 26 per cent increase y-o-y. Large deal wins were over $1 billion in Q3 in contrast to $725 million in Q2. 

HCL Tech too recorded new deal wins TCV at $2.35 billion led by 17 large deal wins. In contrast, its large win count was 11 last quarter. TCS, however, saw a dip from last quarter. Its TCV in Q3 stood at $7.8 billion in contrast to $8.1 billion last quarter. 

Demand resilient

Omkar Tanksale, Research Analyst, at Axis Securities, told , “Strong deal wins indicate that the demand scenario has remained resilient, even though it was not expected. Businesses have now become system driven as all operations are being managed by services themselves; this has made it harder to cut IT spending even in a slowdown.”  As the effect of slowdown always comes in a lag, it may be seen in the deal wins of next couple of quarters, he added. 

“Deal signings improved in North America and were decent in Europe and RoW. During the period, digital – specifically cloud and automation – remained the key driver of the deals signed.” Kumar Rakesh, Analyst – IT and Auto at BNP Paribas India, noted in a recent report on the IT sector. 

Infosys deal pipeline saw traction for automation and cost-efficiency programs. CEO Salil Parekh, in an earnings call, said, “We see that both of our engines, the one for digital and cloud-driving transformation and the one for automation driving cost efficiency, are working and growing for us, even as the environment changes.” 

For Wipro, its bookings were driven by Wipro’s FullStride Cloud Services and Engineering Services, which grew at 25 per cent and 45 per cent year-on-year, respectively. Large deals include new and existing clients seeking a transformation partner or going through vendor consolidation, said its CEO Thierry Delaporte in the earnings call. 

“The deal win momentum will largely continue in the next quarter. While large deals will remain, smaller deals may be delayed. However, the bill-to-book ratio is to be watched out for as the deals might not see execution in the next 4-5 months due to delays,” Tanksale said. 

Nonetheless, companies have called for caution and are watchful of the slowdown in some market verticals. 

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Published on January 17, 2023