Coforge Profit Jumps 56.5% to ₹588 Crore on Record Deal Wins, as Mid-Tier IT Firms Outpace the Giants on AI

While India's largest IT services companies struggle to grow, some of their smaller rivals are racing ahead. Coforge, a Noida-based technology services company, reported another quarter of rapid growth on Friday, October 23, underscoring a widening divide in the industry.

Coforge's consolidated net profit rose 56.5% to ₹588 crore for the July-September quarter, up from ₹375.8 crore a year earlier, Business Standard reported. Revenue from operations jumped 53.6% to ₹6,171 crore from ₹4,016 crore.

In US dollar terms, revenue grew 10.1% from the previous quarter and 40.1% from a year earlier. Organic growth in constant currency was 3.8% sequentially.

Record deal wins

The company signed eight large deals during the quarter, the most it has ever signed in a single quarter, spanning North America, Europe and Australia. It did not name the clients.

Order intake exceeded $1 billion, with the total contract value of new orders at $1.04 billion. The order book signed for execution over the next twelve months stood at $2.38 billion, providing visibility for future revenue.

Coforge added 1,137 employees during the quarter, taking its total headcount to 47,365.

AI lifts margins

Coforge raised its operating profit margin guidance for the next year to 17%, from an earlier range of 15.5% to 16%. Chief executive Sudhir Singh attributed the improvement to the use of AI in existing projects.

"Right now the margin uptake that we are seeing is in the existing fixed price projects where AI is getting infused," Singh said.

The comment highlights a crucial distinction in how AI affects IT services companies. On fixed-price contracts, where the client pays a set amount for a defined scope of work, productivity gains from AI accrue to the service provider, boosting margins. On time-and-materials contracts, where clients pay for hours worked, AI-driven efficiency can reduce revenue, the "compression" that Infosys's chief executive described on the same day.

Singh said the results "put us firmly on course to be the industry growth leader for the third year running."

A tale of two IT sectors

The contrast with Infosys was stark. On the same day, Infosys cut its full-year revenue growth forecast to 1% to 2% in constant currency after what its chief executive called "a soft quarter." Larger peers TCS, Wipro and HCLTech have also reported subdued growth in recent quarters.

Mid-tier companies such as Coforge, Persistent Systems, Mphasis and others have outgrown the largest players for several years. Analysts attribute this to their focus on specific industries and clients, agility in winning deals and willingness to take on larger, riskier contracts. Their smaller size also means that individual large deals have a bigger impact on growth.

Coforge has a strong presence in banking, financial services and insurance, as well as travel and transportation, sectors that have been investing in technology modernisation.

Growth through acquisitions

Coforge's rapid revenue growth has been helped by acquisitions. In recent years, the company has expanded through deals including the acquisition of Cigniti Technologies, a software testing company, which broadened its capabilities and client base. The 53.6% year-on-year revenue growth in rupee terms reflects both organic expansion and the contribution of acquired businesses, while organic constant-currency growth of 3.8% sequentially indicates healthy underlying momentum.

Acquisitions also carry integration risks, including cultural differences, client retention and maintaining margins, which investors monitor closely.

The AI opportunity for services firms

AI is reshaping the IT services industry in several ways. Clients want help building AI applications, preparing their data for AI, and integrating AI into business processes. These projects create new revenue opportunities. At the same time, AI tools are automating coding, testing and maintenance work that has traditionally been the bread and butter of Indian IT.

Companies that can capture new AI work while using AI to improve their own productivity are likely to emerge as winners. Coforge's results suggest it is managing that balance well, at least for now.

What it means for India's IT sector

The divergence between mid-tier and large IT companies has implications for investors, employees and the broader economy. Mid-tier companies are adding employees and growing revenue, while larger companies are more cautious. Overall, IT companies added 16,055 employees in the first half of the fiscal year, Business Standard reported, a modest figure by historical standards.

For India, the IT sector's ability to adapt to AI will be critical. It remains a major source of export earnings and white-collar employment, and its transformation will shape opportunities for millions of graduates.

Risks ahead

Despite strong results, Coforge faces risks. Client concentration, the integration of acquisitions, competition for large deals and the broader economic environment in its key markets could affect growth. Rising wage costs and currency movements could also influence margins.

The broader market environment is also challenging. Indian stocks have been hit by rising oil prices and geopolitical tensions, with midcap and smallcap indices suffering their worst week in 20 months.

The deal-making engine

Large deal wins have become the key indicator of IT services companies' growth prospects. In a market where clients are consolidating vendors and seeking productivity gains, companies that can win multi-year transformation contracts are better positioned. Coforge's eight large deals in a single quarter, a company record, signal strong competitive positioning.

Large deals often involve taking over and modernising a client's existing technology operations, then using automation and AI to reduce costs over time. These contracts can provide steady revenue for years but require careful execution to deliver promised savings while protecting margins.

What comes next

Investors will watch whether Coforge can sustain its growth momentum and deliver on its raised margin guidance. Its ability to convert its order book into revenue and continue winning large deals will be key.

For the industry, Coforge's performance offers a reminder that AI need not be a threat to IT services companies that position themselves well, but it requires rethinking how work is delivered and priced. Analysts will also watch how Coforge manages wage costs and attrition as it expands, and whether its margin improvement from AI can be sustained as clients seek to share in productivity gains. For now, the company's results stand out as one of the strongest performances of the earnings season, and a counterpoint to the gloom surrounding larger IT companies. The company's next results will show whether its record deal wins translate into sustained revenue growth.