Coforge and Persistent Systems Shine Amid Mid-Tier IT Slowdown
The December quarter presented a tale of two trajectories within India's mid-tier IT engineering services sector. While several prominent firms experienced a notable deceleration or contraction in growth, Coforge and Persistent Systems emerged as resilient outliers, continuing to post robust double-digit revenue increases.
A Divergence in Performance
Regulatory filings from the past three December quarters reveal a brief industry uptick after the 2023-24 period, followed by a significant blip this year. Firms including Tata Technologies, Cyient, L&T Technology Services (LTTS), and Tata Elxsi largely reported slower momentum, with key metrics like revenue, margins, and net profits showing clear signs of moderation.
In stark contrast, Coforge reported a revenue growth of 21.5% for the quarter. However, this marked a sharp decline from the 40.3% growth it achieved in the corresponding period last year. Persistent Systems, on the other hand, improved its growth momentum, accelerating to 17.3% from 14.9% a year earlier.
Analysts Decode the Outperformance
Industry experts point to specific strategic strengths driving the success of Coforge and Persistent. "Coforge's growth has been driven by strong BFSI (Banking, Financial Services, and Insurance) exposure, large deal wins, and better offshore leverage," said Phil Fersht, CEO and Chief Analyst at HFS Research. "Persistent continues to benefit from product engineering, cloud modernisation, and embedded AI work tied to revenue-generating transformation rather than mere cost takeout."
Ray Wang, Principal Analyst at Constellation Research, attributed this relative outperformance to greater organizational agility. He highlighted Coforge's strategic acquisition of Encora as a key move to sustain momentum and improve revenue per employee metrics.
The AI and Margin Advantage
Persistent Systems has also made significant investments in artificial intelligence, developing proprietary productivity tools such as Sasva and iAura. These innovations have supported the company's margins despite industry-wide wage hike pressures. Analysis from BNP Paribas noted that AI-driven platform and tooling engagements enabled a margin lift, backing the company's ambitious target of a 200-basis-point expansion by the next financial year.
Broader Sector Under Pressure
The broader engineering services segment continues to face headwinds. Tata Technologies reported a 1.5% year-on-year revenue decline for the quarter. Tata Elxsi recorded an even sharper 5.5% contraction, a significant reversal after posting growth in the previous year.
Phil Fersht explained the challenges facing these firms: "In contrast, Tata Elxsi, Cyient, LTTS, and Tata Technologies are seeing pressure due to an auto and industrial slowdown, delayed R&D spends, and elongated decision cycles, even though margin discipline remains relatively intact." This paints a clear picture of a sector where agility, strategic focus on high-growth verticals like BFSI, and early bets on transformative technologies like AI are becoming critical differentiators for sustained performance.
