TCS Outperforms Infosys in Revenue Growth After Five Years

TCS surpasses Infosys after four consecutive quarters of full-year revenue growth lag. Driven by double-digit growth in regional markets and major mega deal wins from group companies, TCS exhibits significant growth.

Constant currency revenue growth for TCS stands at 3.4 percent in FY24 compared to Infosys' 1.4 percent. TCS last outperformed Infosys in FY19, showcasing a growth of 11.4 percent against Infosys' 9 percent.

Factors Driving TCS' Success:

TCS boasts better large-deal momentum and improved conversion of deal wins to revenue compared to Infosys. The company benefits from a strong deal pipeline and acquisitions from group companies like Jaguar Land Rover.

Analysts credit TCS' growth to its robust deal momentum and advantageous position within the market.

Challenges and Comparisons:

Experts note that while TCS has shown significant improvement, Infosys maintains a broader revenue spread across verticals, horizontals, and geographies.

TCS previously lagged in markets like India, the Middle East, and Africa but managed to perform better in FY24 due to specific factors.

Performance Metrics:

TCS outperforms Infosys on various performance metrics in Q4FY24. TCS exhibits a year-on-year constant currency revenue growth of 2.2 percent, while Infosys grows marginally by 0.2 percent.

TCS surpasses Infosys on operating margin, expanding by 100 basis points to 26 percent, whereas Infosys' margin falls by 40 bps to 20.1 percent.

Headcount and Utilization:

Both companies experience a decline in net headcount, with Infosys recording its fifth consecutive quarter of decline. TCS sees its third consecutive quarter of headcount decline, marking the first full-year net headcount decline in 19 years.

Despite the decline, both companies improve their utilization levels over recent quarters.

Revenue Guidance and Future Outlook:

Infosys revises its revenue guidance for FY24-25 to 1-3 percent, reflecting continued weakness in discretionary and digital projects.

TCS refrains from providing specific revenue growth guidance but expresses confidence in surpassing the previous fiscal year's performance.

Gen AI Revenue and Projects:

TCS discloses revenue from Generative Artificial Intelligence (Gen AI), showcasing a pipeline of $900 million for AI and generative AI projects.

Infosys does not disclose Gen AI revenue but emphasizes its leadership position and extensive use of large language models (LLMs).

Implications and Strategies:

TCS' outperformance underscores its resilience and adaptability in the competitive IT services landscape. Infosys adjusts its hiring model and focuses on improving utilization rates amidst changing market conditions.

Market Response and Analyst Insights:

Analysts anticipate TCS to maintain its outperformance trend in FY25, leveraging potential market turnaround and strategic initiatives. Both companies face challenges in navigating macroeconomic uncertainties and evolving client demands.