Top IT Companies' aggregate revenue per employee dips in FY23

2 Jun 2023 , 11:23 AM

The aggregate revenue per employee for major IT companies such as Tata Consultancy Services (TCS), Wipro, and HCLTech has witnessed a 3.8-11% decline on a five-year compound annual growth rate (CAGR) basis in FY23. As per the detailed analysis given by Moneycontrol, this decline can be attributed to increased hiring in response to the Covid-19 pandemic, surpassing the relatively slower net revenue growth due to lower margins in digital deals. Let’s explore the details.

The decline in Revenue per Employee: The metric of revenue per employee is used to estimate the revenue generated by each employee within a specific timeframe. On a five-year CAGR basis, companies like TCS, Wipro, and HCLTech experienced a 3.8-11% decline in aggregate revenue per employee. 

This decline can be attributed to the hiring spree undertaken by these companies to meet the demand arising from the pandemic, which outpaced the growth in net revenue.

HCLTech’s dip and Highest Revenue per Employee: Among the top players, HCLTech witnessed the steepest decline in CAGR, with an 11% drop. However, it boasts the highest aggregate revenue per employee, standing at $55,704. Over the past five years, HCLTech’s headcount grew at a CAGR of 63.8%, while revenue grew at a comparatively lower rate of 45.8%. Similarly, Wipro experienced a 40.5% CAGR in headcount, leading to a 35.2% CAGR in revenue during the same period.

Infosys and Tech Mahindra’s Performance: While other companies saw their revenue per employee decline over the past five years, Infosys recorded a positive 2.6% CAGR. It is noteworthy that Infosys was the only company in the services segment to achieve this growth. Also, during the same period, Tech Mahindra experienced a 5.6% increase in aggregate revenue per employee.

Industry Comparison: The overall billable revenue per employee for the remaining IT/tech services industry combined amounted to $48,195 in FY23. This figure is lower than the $53,550 achieved by the top five players, emphasizing their dominance in the market.