TCS Vs Infosys: Which IT Giant Performed Better In Q3 Of FY24?

Two tech behemoth Tata Consultancy Services (TCS) and Infosys have announced their financial results for the third quarter of FY24. In the quarter under review, TCS has exceeded expectations, showing its resilience in the challenging macro conditions. However, Infosys Q3 was bleak and seasonally weak, in line with estimates. Both TCS and Infosys share price will be in focus on Friday after their Q3 earnings. Unlike Infosys, TCS has also declared dividends up to Rs 27 per share including a third interim and special dividend for FY24.

1. Profitability, Margins:

TCS' bottom line witnessed growth in single digits, still better than street estimates. However, Infosys recorded a decline in both a year-on-year and quarter-on-quarter basis in Q3FY24.

In the third quarter, TCS posted a consolidated net profit of Rs 11,058 crore, which is attributable to the owners of the company, registering a growth of 1.95% YoY and 2.5% QoQ, Consolidated net profit climbed by 8.84% to Rs 33,474 crore in 9MFY24 versus Rs 30,755 crore in 9MFY23.

Meanwhile, Infosys logged a consolidated net profit of Rs 6,106 crore, declining by 7.3% YoY and 1.7% QoQ. Net profit for 9MFY24 stood at Rs 18,264 crore, up by 1.7% from Rs 17,967 crore in the corresponding period of the previous year.

While EBIT margin expanded by 50 bps to 25% in the quarter for TCS, and that of Infosys margins contracted by 220 bps YoY and 153 bps QoQ to 21.3%.

2. Top-Line Growth!

TCS' top line was still steady compared to that of Infosys.

During the quarter, TCS' revenue from operations on a consolidated basis stood at Rs 60,583 crore, which rose by 4.04% YoY and 1.49% QoQ. In constant currency, TCS revenue growth was at 4% YoY. While EBIT margin expanded by 50 bps to 25% in the quarter. In 9MFY24, TCS registered an 8.03% growth in consolidated revenue to Rs 1,79,656 crore, as against Rs 1,66,296 crore in 9MFY23.

Meanwhile, Infosys' consolidated revenue came in at Rs 38,821 crore in Q4FY24, registering a marginal growth of 1.3% YoY but declined 0.4% QoQ. For the nine months, Infosys revenue in constant currency grew by 1.8% YoY, on the contrary, in Indian rupees, the company's revenue stood at Rs 115,748 crore registering a growth of 5.9% YoY.

3. Attrition, Headcount!

In percentage terms, Infosys has a much lower attrition rate than TCS. But more employees exited Infosys than TCS in Q3FY24.

TCS recorded a decline in both attrition and headcount. TCS let go of 5,680 employees sequentially, taking its total headcount to 603,305 employees as of December 31, 2023. The company's IT services' attrition declined further to 13.3% for the last twelve months.

Infosys reported a headcount of 322,663 employees as of December 31, 2023, with a net reduction of 6,101 employees in Q3FY24. Utilization ex-trainee improved by 90 bps QoQ to 82.7%. Infosys attrition rate has dropped significantly to 12.9% by the end of the December quarter for FY24.

4. Order Book:

Both the companies said their order book remained strong. TCS's order book stood at $8.1 billion, while its book-to-bill ratio came in at 1:1.

Whereas Infosys's order book for Q3FY24 was at $3.2 billion with 71% of this as net new deals.

5. Artificial Intelligence Push!

TCS and Infosys are extensively focused on driving growth in AI.

TCS said, AI.Cloud led the demand among Service Lines with strong momentum sustaining Cloud migrations and increasing interest among customers for AI and Generative AI.

Further, Salil Parekh, CEO and MD believes their clients are leveraging its Topaz generative AI capabilities and its Cobalt cloud capabilities to create long-term value for their businesses. Infosys Topaz is an AI-first set of services, solutions and platforms using generative AI technologies. While Infosys Cobalt is a set of services, solutions and platforms for enterprises to accelerate their cloud journey.