IT Q3 Preview - Setting Stage For Revival; TCS, Tech Mahindra, Sonata Software - DRChoksey's Top Stock Picks

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Deven Choksey Report

The Indian IT sector exhibited a marginal improvement in demand during Q2 FY25, reflecting early signs of recovery. However, as the industry enters Q3 FY25E, growth is expected to moderate, weighed down by seasonal furloughs and typical calendar year-end softness.

One of the primary concerns heading into Q3 FY25E is the absence of mega-deal closures, a segment where Indian IT companies have faced increasing competition from global peers.

In recent quarters, intensified rivalry in cost-optimisation deals and the accelerated adoption of Generative AI-driven initiatives have contributed to market share erosion. This trend underscores the need for Indian IT firms to fortify their positioning in the evolving digital transformation landscape.

On a positive note, BFSI segment emerged as bright spot in Q2 FY25 and is expected to continue its momentum in Q3 FY25E, driven by renewed tech spending by banks and financial institutions.

Notably, net employee additions and tech hiring have shown encouraging signs of revival, reinforcing optimism around the IT sector’s growth trajectory.

Management commentaries during Q3 FY25 earnings calls will be pivotal, as they will offer insights into client budgeting trends for CY25E.

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