Leading providers bounce back to double-digit growth as pandemic pressure eases

As we enter the final quarter of 2021, the latest wave of earnings announcements is hitting the news. It truly has been a year of recovery. Thanks to the pandemic, in 2020, many IT and business services providers experienced revenue declines for the first time in their history. However, as we progress through 2021, an increasing number of providers are returning to their pre-pandemic growth levels. Enterprises have an opportunity to make providers’ growth work for them, leveraging their latest offerings and investments and solidifying themselves as key clients.

• Accenture, often the market’s bellwether, posted its second consecutive quarter of double-digit revenue growth this quarter. The company explained growth was driven by continued success across every Accenture geographic market and industry group.
• HCL also reported its second quarter of consecutive double-digit revenue growth this quarter, led by its digital business, engineering, and cloud services, alongside the signing of 14 new deals.
• IBM (Services) reported growth of 1.5% YoY, a slight slowdown from the 4.7% YoY growth posted in Q2 2021 but a significant improvement on the revenue declines posted throughout 2019 and 2020. Global business services continues to drive growth, so it will be interesting to see how the Kyndryl spin-out will impact revenues.
• Infosys continued to post an industry-leading operating margin and reported high double-digit growth for the second consecutive quarter. Growth was broad-based across Infosys geographies and segments, but North America and financial services were significant growth drivers.
• TCS also posted an industry-leading operating margin coupled with solid double-digit growth, albeit a slight slowdown. TCS’ growth was driven by its strong product and platform portfolio, with TCS BaNCS, TwinX, and TCS Cognix having marquee deal wins this quarter.
• Wipro reported another impressive high double-digit growth rate this quarter, the highest of the early announcers, thanks to its strong acquisition strategy, which Thierry Delaporte says there will be more of. Its operating margin remained in the high double-digits, too.

The Bottom Line: Leading service providers are back with a bang thanks to the once-in-a-decade demand environment

Consistent double-digit revenue growth is clearly back in the cards for leading service providers, which have successfully protected their margins throughout the pandemic. TCS Chief Executive Officer and Managing Director Rajesh Gopinathan described the current demand environment as a “once-in-a-decade opportunity,” so it will be interesting to see which service providers take full advantage of the opportunity and which fall behind. Enterprises must ensure they seek growth with their chosen service provider, leveraging their latest and greatest offerings, investments, and acquisitions to ensure optimal business outcomes.