The Q1 2024 financials from the TWILTCH providers—TCS, Wipro, Infosys, LTIMindtree, Tech Mahindra, Cognizant, and HCLTech—reveal a challenging landscape for India-heritage IT and business services firms. These giants, traditionally seen as bellwethers for the broader industry, are now facing a sharp deceleration in growth, with some even reporting revenue declines.
The much-anticipated boost from generative AI (GenAI) has yet to translate to financial performance, leaving these companies to struggle with low single-digit growth. Enterprises are cutting back on discretionary spending, exacerbating the situation. Meanwhile, shifting customer demands, emerging technologies, and disruptive new business models are pushing enterprises to innovate. However, macroeconomic headwinds are making it difficult for them to realize these aspirations, further straining the TWILTCH providers.
Delving into the earnings announcements from the TWILTCH providers:
- TCS reported 2.3% YoY revenue growth in Q1 2024, down from 7.5% in Q1 2023. BFSI (-2.6%), communication and media (-4.9%), and technology and services (-5.7%) drove the decline. North America and Europe lagged, while India surged 37%, bolstered by a $1.83 billion BSNL deal.
- Wipro saw a 5.8% YoY revenue decline in Q1 2024, down from 3.6% growth in Q1 2023, with widespread declines in communication, BFSI, and manufacturing. However, the health business stood out with 8.9% growth. This marks Wipro’s fourth consecutive quarter of revenue decline.
- Infosys posted 0.2% YoY growth in Q1 2024, with declines in financial services, retail, and life sciences offset by growth in manufacturing, communication, and hi-tech. North America saw a 2.1% decline, while Europe grew 6.2%. Infosys’ balanced portfolio and ability to win mega deals is helping to maintain growth. The company highlighted its focus for this quarter on cost take-out, consolidation, efficiency gain, and digital transformation.
- LTIMindtree reported a 1.1% YoY revenue decline in Q1 2024, following 11.9% YoY growth in Q1 2023. The slowdown was driven by performance of the BFSI and retail businesses, and Europe and rest of the world geographies. In particular, the BFSI business was impacted by the cancellation of two large projects due to client budget reprioritization. However, leadership believes the LTI-Mindtree merger supports a shift toward longer-term, efficiency-driven deals.
- Tech Mahindra reported a 7.2% YoY revenue decline in Q1 2024, the steepest in the TWILTCH group, driven by declines across all sectors except manufacturing. The company is undergoing a major reorganization and strategy shift with goals for FY27 to improve growth, reduce operational cost, and capture large deals—but the impact on financials is yet to be seen.
- Cognizant reported a 1.1% YoY revenue decline in Q1 2024. Recognizing plateauing revenue, it recently announced the acquisition of Belcan for $1.3 billion to drive new growth. Belcan adds complementary engineering capabilities in Industry 4.0, aerospace, and defense and will quickly bring additional revenue for Cognizant. The Belcan bet is a high-stakes move to disrupt the IT services stalemate with hybrid engineering, IT, OT, and BT capabilities.
- HCLTech reported 6.0% YoY revenue growth in Q1 2024, the highest among the TWILTCH providers, marking four consecutive quarters of upward momentum. This growth was driven by telecom, media, and publications (38.6% YoY), the $2.1 billion Verizon deal, and manufacturing (13.8% YoY). HCLTech’s upgraded strategy integrates engineering and R&D sales with IT and business services to meet client demands for integrated services and capture broader C-suites’ spending. The impact of this approach on future financials will be closely watched.
The Bottom Line: It’s time for the TWILTCH providers to rethink their business models and find new ways to meet their clients’ evolving demands.
As enterprises reprioritize spending, service providers are targeting large deals focused on cost-takeout, efficiency gains, consolidation, and delivering on the GenAI hype. However, the excitement around GenAI is yet to impact the providers’ top and bottom lines—something they should look to change in the coming years.
