Top IT firms experience decline in revenues from key clients in Q4

Revenues accruing to IT firms from top clients shrunk during the October-December quarter. While the decline was for all the firms if compared on a year-on-year basis, it was for about half of the firms on a sequential basis.

For instance, Infosys’ top 25 clients contributed about 35.3% in the third quarter of FY23, but contributed about 33.7% in same quarter this fiscal.

Similarly, Wipro’s top 10 clients contributed 21.2% a year earlier, but the same came down to 20.5% in Q3 of FY24. Their contribution to Wipro’s revenue also declined sequentially.

Wipro recently stated that it is rationalising its total number of clients in an effort to boost margins and even letting go some of the low profitable work.

HCLTech saw decline in revenue from top 5, 10 and 20 client categories on a YoY basis. C Vijayakumar, CEO and MD, HCLTech during the earnings call, said, “While in smaller clients, there are some challenges. In some of the big tech, we see some increase. There have been some clients where decline also happened”.

Tech Mahindra saw contribution from the categories of top 5, 10 and 20 clients falling YoY and also sequentially. Its revenue from top five clients declined by 16.3% YoY. Similarly, the revenue flow from top 10 and 20 clients declined 8.3% and 6.2% YoY, respectively.

Commenting on top clients’ declining contribution to IT firms’ revenue, Pareekh Jain, founder at Pareekh Consulting, said, “The three reasons for this are: ramp down of large deals like Xerox, slow ramp up of large deals bagged recently and cancellation of some projects. This is happening in a secular way, and is not limited to any particular company. This is also why IT firms bagging large deals with billion dollar TCV (total contract value) are not seeing any positive reflection in their revenue”. Financial Express