India's Big Four Service Giants Soar on AI Demand

India's leading IT service providers, including HCL, Infosys, TCS, and Wipro, witnessed a surge in their share prices as they announced strong quarterly results. The impressive performance was attributed to a robust deal pipeline fueled by the growing demand for artificial intelligence (AI). Despite slow headcount growth, the combined market capitalization of the four giants increased by $22 billion in just two days this week.

In Q3 23/24, Infosys reported a marginal 0.1% YoY growth in revenues, reaching $4.66 billion. HCL experienced a significant 5.3% YoY increase, reaching $3.41 billion, while TCS saw a 2.9% YoY rise, reaching $7.28 billion. In contrast, Wipro faced a 6.9% decline, settling at $2.66 billion. Wipro's CEO, Thierry Delaporte, expressed optimism despite the decline, emphasizing a strong performance in the quarter.

TCS's CEO, K Krithivasan, attributed the market dynamics to a post-pandemic correction, noting that clients were re-evaluating their investments. He highlighted a shift in focus towards addressing technology debt once certainty returned. HCL's CEO, C Vijayakumar, pointed to increased headcount as a sign of the company's optimism, in contrast to the other three companies that experienced a decline in headcount.

While the top four collectively lost 12,637 employees, Infosys and Wipro implemented wage hikes. Infosys reported a 83.7% utilization rate, with plans to hire more at short notice from trainees. TCS, on the other hand, managed demand by cutting subcontractor costs and investing in capacity.

Despite a seasonally soft quarter, the order books across the industry showed promise, with strong deal booking momentum. AI played a pivotal role in this growth, with companies like Infosys, HCL, and TCS highlighting the significance of AI in their business strategies. The auto sector emerged as a key focus, with companies expressing strong interest in AI applications, particularly in the automotive industry. Wipro, in particular, highlighted significant investments in cloud, automation, and autonomous technologies related to the automotive sector.

Overall, the quarterly results showcased the increasing importance of AI in shaping business strategies for these Indian IT giants, with a positive outlook for the future.

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