Muted performance likely to impact hiring by IT companies

Bengaluru: India’s top IT services providers recently released their third quarterly earnings of the current fiscal year (Q3FY25), which were largely subdued, however, they remain cautiously optimistic. Historically, the third quarter of a financial year is usually weak for the IT companies due to seasonal furloughs. 

Higher attrition also emerged as a key trend in the latest quarterly results while net workforce addition also slowed. Out of the top 4, only Wipro and Tata Consultancy Services (TCS) shared an outlook on hiring. 

While Bengaluru-based Wipro maintained it at 10,000 - 11,000 professionals (same as FY25), TCS is looking to hire more than 40,000 freshers in FY26. However, these companies also posted a collective net decline of 6,527 employees in their workforce in Q3. 

While HCLTech did not give an outlook, its total headcount is going to fall short of the 10,000 target for the ongoing financial year, according to the estimates given by the firm during earnings call. 

Analysts who spoke to DH are of the view that a muted hiring is likely to follow in the next financial year, however, hopes are pinned on supportive policies by US President Donald Trump boosting demand, resulting in more deals and a subsequent uptick in hiring. 

For India’s IT export sector, scarcity of mega deals is a key challenge. While TCS posted a robust total contract value (TCV), Wipro and Infosys reported lower deals in the third quarter as compared to the preceding year. “Cost optimisation remains a top priority for clients, leading to delays in large-scale transformation projects,” said Krishna Vij, Vice President, Teamlease Digital. 

However, analysts believe that going ahead, a trend of multi-source deals might also take over as mega deals are becoming unpopular. Clients are moving towards multi-sourced deals as it allows them to be selective on opportunities and certain demands. 

“If you look at some of these IT companies, they are very selective in terms of picking up the deal so these smaller deals can be more profitable and provide more opportunities. When a company signs large deals, they also take over the complete legacy infrastructure as well and the environment which needs to be transformed which may not always be that lucrative,” said DD Mishra, vice president - analyst at Gartner.

While the sector is expected to revive gradually as sectoral experts pencil in a better 2025, profit pressure is likely to persist. Three out of the top four IT companies have raised their revenue guidance for 2024-25 on the back of improvements in discretionary spending by clients. Meanwhile, HCLTech estimates the calendar year 2025 to be better than the previous year. 

Another hurdle for the sector is that  while deals continue to happen, the lag period has only increased, impairing revenue flows. “Although clients are signing deals, they are going a little slow in terms of expenditure.  When the overall macroeconomic environment is not conducive for bringing in change at a speed that one wants, clients tend to go slow in terms of their plans. Hence, a slow execution takes a bit of a hit and revenue generation for these IT services companies becomes a little difficult,” explained Deepak Jotwani, Vice President and Sector Analyst, ICRA.

The Indian IT sector is undergoing a period of uncertainty, largely due to global economic factors. While demand in the US seems to be picking up, Europe continues to be soft. Companies and analysts are closely watching policy changes on the back of a new administration in the US (given that majority of clients for these companies are US-based) as it is going to have a significant impact on the spending capabilities and orderbooks.