Q1 results analysis: Digital is the only way forward for IT firms

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26 Aug, 2025 12:21

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The very question, how important is digital, could be considered archaic if the quarterly results of the top IT majors and their optimism in the digital space are taken as indicators.

The top IT firms have ramped up their hiring for the quarter, especially in new age technologies. These enterprises have also sharpened their focus on digital platforms, which is a key business strategy.

This is despite the softness in demand due to political uncertainty in Europe, especially in banking and financial services and insurance sectors (BFSI), healthcare and retail.

In fact it would not be too much of a stretch to say it is this very focus on digital platform and services that are helping these firms tide over the uncertainties.

Let us take Infosys for instance. BFSI is one of the largest revenue generators for the firm accounting for over 30 percent of total revenue. It registered a strong double digit growth of 11.5 percent in constant currency even as the company said it continues to see softness from Europe and capital markets in the US.

So how was it able to achieve the growth? According to Nilanjan Roy, CFO, Infosys, the company's sharpened focus on its in-house financial digital platform Finacle and its acquisition of Stater played a significant part in it.

Finacle is a flagship product of Infosys and the company has seen significant traction for the product in recent times. In addition the company is also developing capabilities to cater to the growing demand in niche areas such as mortgage.

Infosys has seen similar growth across verticals buoyed by demand for digital transformation and investment by telecom service providers on 5G across the world. The company increased its revenue guidance its guidance from 7.5-9.5 percent to 8.5-10 percent for the year.

TCS and Wipro are also on the same path though they are more cautious about growth.

While TCS' Q1 results showcased slower than expected growth trajectory, Wipro's was disappointing given that Q1 is a seasonally weak quarter for the firm.

However, both the firms have ramped up their hiring in Q1 anticipating demand for the rest of the year.

Rajesh Gopinathan said that the company gave 30,000 offer letters to freshers in the first quarter. It recruited over 12,000 people in Q1, the highest for a first quarter in the last five years in anticipation of demand unfolding.

This is also a part of TCS' strategy to build and train talent in-house as it expands its platform capabilities.

TCS’s financial services product TCS BaNCS is gaining traction and saw seven new deal wins. Its blockchain solution Quartz won two clients in the first quarter.

In case of Wipro, Abidali Neemuchwala, CEO, said that Wipro is ramping up its talent pool, both freshers and lateral hires, as the company sees a strogn digital deal pipeline in the coming quarters.

The company on-boarded 6,000 freshers in Q1, a significant jump compared to Q1 in previous year, said Saurabh Govil, Chief Human Resources Officer, Wipro.

But many of its digital growth parameter saw decline in growth.

The company’s digital operations and platforms dipped 3.1 percent compared to the quarter ended March 2019. The modern application services segment dropped 1.7 percent sequentially and 0.9 percent YoY basis. Industrial and engineering services fell 1.2 percent sequentially and saw a marginal increase of 0.4 percent YoY.

Bhanumurthy BM, COO, Wipro, attributed the decline to project completions in application and engineering services and delay in the start of newer projects. "In engineering services, we see softness. That is why you are not seeing the level of growth you see in YoY for other practices. If you see other capabilities, analytics, infrastructure services, as well as our digital operations have grown significantly well YoY. These are basic and fundamental for any digital strategy for any organisations," he added.

Digital, clearly, is the way forward.

But will high dependence on digital come with a cost? Probably.

Unlike legacy projects, digital projects are short and seasonal. Unless there is a continuous demand they are likely to pull the revenue down. This was what happened in Wipro’s case where key digital growth metrics of Wipro saw a decline this quarter.

An analyst told Moneycontrol earlier that the enterprises need to find a balance between legacy/traditional projects that are long term and new age digital projects that are short term.