The Indian IT sector is preparing for Q3 FY25 earnings, with TCS leading on January 9. Analysts expect mild growth in major players, but tier-2 firms may outperform. Revenue results may be influenced by seasonal furloughs and macroeconomic factors, with forecasts indicating stable margins despite wage hikes.
The Indian IT sector is poised for earnings announcements for the third quarter of FY25, commencing with Tata Consultancy Services (TCS) on January 9, followed by other firms such as Infosys and Wipro. Analysts anticipate a rebound in technology spending throughout 2025, extending beyond the traditional US Banking, Financial Services, and Insurance (BFSI) segment, thereby boosting various industry sectors like Hi-Tech ahead of expectations.
Despite the expected recovery, seasonal furloughs may impact Q3 results. However, macroeconomic uncertainties are diminishing, leading to increased optimism regarding technology investments in the calendar year 2025. Brokerage firm Motilal Oswal Financial Services predicts tier-2 IT companies will outperform tier-1 firms in growth during this upcoming quarter.
In terms of performance metrics, constant currency revenue growth for Tier-I IT firms is anticipated to range from -1.0% to +3.7%, while Tier-II firms may see growth from 0% to approximately 5% quarter-over-quarter. Major players, including TCS, Infosys, and HCL Technologies, are likely to report minor sequential growth of 0.4%, 1.0%, and 3.7%, respectively, with mid-tier companies also expected to perform well.
Motilal Oswal forecasts that Q3 margins for IT companies will generally remain stable, barring wage increases. However, some firms like Infosys may experience margin declines due to anticipated seasonal effects and furloughs. Notably, companies such as Coforge and L&T Technology Services are expected to mitigate these declines through effective cost management strategies.
Regarding specific firms, TCS is projected to have modest growth, with a likely EBIT margin improvement due to operational efficiencies and talent development. Infosys’s revenue is also expected to be modest, reflecting seasonal impacts, while HCL Technologies benefits from renewals within its product business. Conversely, Wipro is anticipated to see revenue contractions, primarily due to softness in various sectors and seasonal furloughs.
The Indian IT sector, a significant contributor to the national economy, is gearing up for crucial earnings announcements for the October-December quarter. The results for major firms like TCS, Infosys, and Wipro will provide insights into the industry’s overall performance amid a backdrop of recovering technology spending. Analysts are optimistic about growth potential but caution against impacts from seasonal shifts and macroeconomic factors.
In summary, the upcoming Q3 FY25 results for the Indian IT sector are expected to showcase a mixed performance among major players. While tier-2 companies may demonstrate robust growth, key players like TCS and Infosys are likely to register modest sequential gains influenced by seasonal effects and other challenges. However, the outlook remains cautiously optimistic as technology investments are poised to improve moving into 2025.
Original Source: www.livemint.com
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