The country's No.3 software services provider Wipro Ltd posted an 18% gain in quarterly profit, joining bigger rivals Tata Consultancy Services Ltd and Infosys Ltd in reporting better-than-expected earnings.
Wipro, whose customers include Apple Inc and BP PLC, said net profit for the three months ended December rose to 17.16 billion rupees from 14.56 billion rupees a year earlier. That compares with the average estimate of 16.45 billion rupees in a poll of 20 analysts, according to Thomson Reuters data.
Strong third-quarter results by Infosys, Tata Consultancy and HCL Technologies Ltd have led investors to anticipate more good news from the industry.
Even before Wipro announced its earnings, UBS on Thursday upgraded its stock to 'buy' from 'sell,' confident that the software services export sector is headed for a recovery.
"We have seen broad-based growth in the quarter with all our verticals growing sequentially," TK Kurien, chief executive of Wipro's IT business, said in a statement on Friday.
Economic uncertainty had led to concerns that clients in the United States and Europe, which account for more than 75% of the country's IT outsourcing revenue, will continue to hold back on IT spending.
Research firm Gartner now says worldwide IT services spending will rise 5.2% to $927 billion in 2013, compared with growth of 1.8% in 2012.
In the quarter ended December, Wipro's IT business revenue in dollar terms rose 2.4% from the September quarter to $1.577 billion, meeting its own guidance of 1.2 to 3.5%.
For the three months ending March, Wipro said IT business revenue will be between $1.585 billion and $1.625 billion, or a sequential gain of 0.5% to 3%. That compares with analysts' expectations of a 1% to 3.5% increase.
Shares at Wipro, valued at $19 billion, have risen about 9% so far this year, compared with a 2% increase in the Nifty.
In November, Wipro said it would fold its non-IT units into a separate privately held company called Wipro Enterprises in a bid to boost profitability.
The listed company would focus exclusively on the IT business, which accounted for 86% of Wipro's revenue and 94% of operating profit. Wipro expects this process to be completed by April.