Weak tech spending by telcos could put IT revival on hold

livemint.com:

Mint analysis of these firms—Tata Consultancy Services (TCS), Infosys, HCL Technologies, Wipro and Tech Mahindra—revealed that revenue from the communications and media vertical was down nearly 3% from $8.49 billion in FY23 to $8.25 billion in FY24. Tech Mahindra was almost single-handedly responsible for this decline, having lost $320 million or 12.1% in annual revenue from telecom clients in FY24. A consensus of three analysts compiled by Mint projected a further downside of 3-5% in telecom revenue for the industry’s top five firms in FY25.

At this rate, these firms could lose more than $400 million in net revenue from telecom clients – a substantial figure, given the already weak revenue growth projections for the fiscal year. For context, Infosys expects overall revenue to grow 1-3% in constant currency terms, while HCL Technologies expects 3-5% revenue growth. Wipro, which only provides quarterly guidance, expects June-quarter revenue to decline 1.5% or grow 0.5% at best.

Also read: Can electric cars electrify muted IT firms in a dull year? To be sure, the top five firms rely on telecom clients to varying degrees. Tech Mahindra earns more than one-third of its net revenue (36.9%) from telecom clients and could thus be hit the hardest if the projected revenue slowdown in this vertical materialises. Infosys draws 12.3% of its annual revenue from telecom clients, while HCL Technologies gets 9.2% of its revenue from them.