Infosys, Wipro exceed Q2 revenue estimates as client spending recovers

Indian software services giants Infosys and Wipro have surpassed quarterly revenue expectations, buoyed by a resurgence in spending from their primary clients in the financial sector.

After more than a year of restrained spending amid economic uncertainties and elevated borrowing costs, global banks are beginning to revive postponed projects. This trend is providing a much-needed boost to the $254 billion Indian IT sector, which derives about one-third of its revenue from banking, financial services, and insurance (BFSI) clients.

Infosys , India's second-largest IT services provider, reported a 2.3 per cent increase in revenue from its BFSI segment in constant currency terms during the second quarter, marking its strongest growth in this area in seven quarters. The company's overall revenue rose by 5.1 per cent, exceeding the average analyst expectation of a 4.7 per cent increase, according to LSEG data. However, Infosys reported a profit of Rs 6,506 crore, falling short of the average analyst estimate of Rs 6,806 crore due to rising sales and market costs.

Meanwhile, Wipro , the fourth-largest IT services firm, experienced a modest 0.6 per cent revenue growth in its BFSI segment, its first increase since March 2023. Revenue from the U.S. and Canada, two crucial markets for Wipro, also showed positive growth. Despite a 1 per cent decline in overall revenue, this was less than the anticipated 1.1 per cent drop by analysts.

The Federal Reserve's recent decision to initiate its interest rate cut cycle last month is expected to further enhance the prospects for the IT sector in North America.

In response to the positive trends, Infosys has raised its full-year revenue growth forecast to a range of 3.75 per cent to 4.5 per cent, up from its previous estimate of 3 per cent to 4 per cent. Earlier this week, HCLTech, the third-largest IT services company, also adjusted its full-year revenue forecast upward, providing additional optimism in a market where TCS noted client caution in spending.

(With Reuters inputs.)