Revenue growth(1) of all the IT and business process service providers continues to slow, thanks to enterprises moderating discretionary spending and taking longer to sign deals, as well as the usual seasonal furlough. Typically, we expect the smaller players to report higher growth rates than their larger peers, although smaller firms are often more exposed to macroeconomic headwinds. This trend continued in Q3 2023. Here, we have delved into the financial reports of the five providers reporting the highest year-over-year revenue growth rates in Q3 2023. Enterprises searching for a new partner might want to keep an eye on this list:
- Sonata Software: Sonata Software was the fastest-growing provider in Q3 2023, reporting revenue growth of 28% YoY. Higher growth was noted for its international business, driven by the US. We expect its recent acquisition of Quant Systems (its biggest ever) and increased focus on cloud and data to help it continue this growth trajectory.
- Globant: Globant reported the second-highest revenue growth of 19% YoY in Q3 2023, led by M&A and expansion into new geographies and offerings. Its recent growth-driving acquisitions include Vertic (digital marketing, Denmark), Fivvy (banking, US), ExperienceIT (healthcare, North America), and Pentalog (digital transformation, France). Vertically, growth was driven by media and entertainment, consumer, retail, and manufacturing industries. Geographically, Europe led growth, but Globant has reportedly invested $1 billion in LATAM for further expansion in the Americas, along with an increased focus on AI and emerging technologies to help clients in North America with nearshore services.
- Persistent: Persistent reported revenue growth of 14.1% YoY in Q3 2023. This quarter’s growth was primarily driven by growth in North America and Europe and its three focus industries: BFSI, healthcare and life sciences, and software, high-tech, and emerging industries. Its long-term vision is to double revenue from its current $1 billion to $2 billion in the next three years. To reach this goal, it is investing in people; it recently made additions at the C-suite level and plans to expand through M&A, partnerships, and technology investments, particularly cloud, data, and AI solutions. Diversifying to other regions beyond North America will help.
- EXL: EXL reported revenue growth of 13.7% YoY; insurance is a key growth driver in the current quarter (Q3 2023). More than 80% of EXL’s revenue is concentrated in North America; the provider has a significant opportunity to penetrate other markets like Europe, APAC, and ANZ to drive business resilience and growth.
- Coforge: In Q3 2023, Coforge reported revenue growth of 12.6% YoY, fifth highest among all service providers(2). Coforge’s growth is steady across all its business verticals and regions. Despite difficult macroeconomic conditions, its overall revenue growth has maintained double-digits throughout 2023, at approximately 13% for the last three quarters.
The Bottom Line: These mid-tier(3) companies continue to beat the market’s average growth rate despite challenging macroeconomic conditions, indicating their clients’ confidence in their ability to deliver. Enterprises should take note.
Notes: (1) Growth data represents HFS estimates based on analysis of publicly available information. The year-on-year (YoY) growth compares a quarter with the same quarter the previous year.
(2) HFS considered Accenture, Capgemini, Coforge, Cognizant, Conduent, DXC, EPAM, EXL, Genpact, Globant, HCLTech, IBM, Infosys, Kyndryl, LTIMindtree, Mphasis, Persistent, Sonata Software, TCS, Tech Mahindra, Wipro, and Zensar for this analysis.
(3) The HFS definition of mid-tier companies includes those with revenue between US $500 million and US $2 billion.
Data sources: HFS Research and 2023 earnings reports of leading service providers
