Currency depreciation is expected to benefit IT companies as they navigate the third quarter, with HCLTech and Coforge poised for growth. Key earnings announcements in January will provide insights into 2024 and 2025 prospects, with BFSI recovery aiding expansion. Analysts anticipate varied performance among leading firms, with a focus on future IT budgets and hiring trends.
The currency depreciation may provide impetus to IT companies as they navigate the typically sluggish third quarter. Pareekh Jain, founder of EIIR Trend, anticipates that performance will improve this season thanks to the weakened rupee. The outlook for 2024 and 2025 projects a market recovery, with HCLTech expected to lead organic growth among top-tier software service exporters due to its robust software business seasonality.
HCLTech’s consistent performance in the IT outsourcing sector, alongside Coforge, which is set to benefit from significant deal ramp-ups among mid-tier players, suggests promising growth for the industry. The banking, financial services, and insurance (BFSI) sectors are expected to recover and drive growth, while challenges in manufacturing, especially automotive, may hinder overall performance.
With upcoming earnings announcements beginning January 9, attention will focus on spending budgets and the demand outlook for calendar year 2025. TCS, HCLTech, and Infosys will report results shortly after, and analysts predict a slight revenue growth moderation in Q3 FY25, with notable performance divergence among industry players.
While some firms like TCS and Wipro are anticipated to experience revenue declines, HCLTech and Coforge are expected to show robust growth of 4.2% and 4.5%, respectively. Furthermore, margin expectations remain mixed, influenced by recent wage hikes at Wipro and LTIMindtree, while TCS and HCLTech are projected to perform better due to effective cost management.
The ongoing depreciation of currencies against the dollar introduces additional foreign exchange headwinds for IT firms, particularly for TCS and HCLTech. Reports suggest that TCS may face challenges with growth due to the BSNL deal ramp-down but is expected to thrive through its diverse offerings as demand recovers.
Recent revenue guidance revisions by Accenture bolster expectations for revenue growth in FY26. Analysts estimate that Infosys may raise its revenue forecast from 3.75-4.5% to 4-4.5%, while HCLTech is likely to adjust its outlook upwards from 3.5-5% to 4.5-5.5%. Wipro, however, may report a 1% sequential revenue drop amid changing consulting growth metrics.
Key areas of observation for upcoming earnings include client IT budgets, discretionary spending trends, deal pipelines, and pricing strategies across vital geographic markets such as North America and Europe. Another significant focus will be the progress on Generative AI initiatives and recruitment plans in anticipation of increased demand and competition from global capability centres.
The technology outsourcing industry typically experiences various seasonal fluctuations, with Q3 often marked as a slower period. However, currency fluctuations, particularly the depreciation of the rupee against the US dollar, can significantly influence earnings and growth prospects for IT firms. The industry leaders, like HCLTech and Infosys, are closely monitored during their earnings announcements, as these reports provide insights into their strategic adjustments and market outlook for the upcoming years.
The technology outsourcing industry appears poised for a recovery, aided by currency depreciation and a potential uptick in demand across essential sectors. While growth expectations vary among key players, there is optimism for improved performance in 2024 and 2025, especially in BFSI. Analysts will closely monitor the forthcoming earnings reports to gauge the health of the sector and the future trajectory of IT spending and demand.
Original Source: startupnews.fyi
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