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EU bright spot for Indian IT as US slows down

US, which accounts for 50% revenue for domestic software sector, showed signs of substantial slowdown, while European Union contributing up to 30% to IT firms’ top line

EU bright spot for Indian IT as US slows down

Bridging The Gaps

Europe performs better for Indian IT firms than US

♦ Despite better growth, European growth may not able to overcome the slowdown seen in the US

♦ Many large deals came from European clients in Q2FY24

♦ Especially, UK continues to be a growth spot for Indian IT industry

We expect a difficult end to the year and a difficult first two quarters of next year - Peter BendorSamuel, CEO, Everest Group, tells Bizz Buzz

Bengaluru: Europe has emerged the growth spot for Indian IT services providers as the key market- the US shows signs of slowing down. In the just ended second quarter, most IT firms witnessed good growth coming from European market, while the US showed signs of substantial slowdown.

While the US is the largest market for Indian IT industry with more than 50 per cent of revenue coming from this North American geography, while the European continent contributes in the range of 20-30 per cent to IT firms’ top line.

In the second quarter, Tata Consultancy Services (TCS) reported a marginal 0.1 per cent rise on year-on-year term in its revenue coming from North America. However, Europe performed well for the Tata Group company with the United Kingdom emerging as the growth spot. While UK witnessed revenue growth of 10.7 per cent YoY, continental Europe reported a rise of 1.3 per cent during this period.

“By geographic markets, we see maximum caution in North America and Continental Europe, which grew 0.1 per cent and 1.3 per cent respectively. We continue to have good momentum in the United Kingdom,” NG Subramaniam, Chief Operating Officer of TCS, had said during the analyst call. Second largest IT services player Infosys saw its revenue growing at one per cent in North American geography, while Europe witnessed a growth of 5.4 per cent during the second quarter of ongoing financial year.

Though companies like HCL Tech saw higher growth rate in the American geography, still Europe continued to perform well for the company during the second quarter.

“Many large deals in the second quarter came from European geography, indicating that clients are increasingly investing in technology for cost savings. Situation amid the Russia-Ukraine war seems to be stabilising for major European economies. Especially, the UK as a market is performing for most large IT firms in recent quarters,” said a Mumbai-based analyst.

Among verticals, financial services, and energy and utilities are some of the verticals that slowed down in North America, while clients in Europe continued to invest in technology spend.

Despite Europe performing well for Indian IT companies, it may not be able to compensate for the growth slowdown coming from the US. Analysts are of the opinion that Indian IT industry may continue face slowdown during the rest half of current financial year.

“We expect a difficult end to the year and a difficult first two quarters of next year,” Peter BendorSamuel, CEO of global consultancy firm, Everest Group, told Bizz Buzz.

Debasis Mohapatra
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