IT Q3 Results Preview— From Margin, Guidance To Revenue Outlook, How Will TCS, Wipro & Other IT Stocks Perform

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HDFC Securities Institutional Equities

Growth divergence is expected to persist in Q3 FY25, with tier-1 Information Technology revenue growth ranging from +5% to -1% YoY, mid-tier IT seeing an even wider range of plus 20% to -1% YoY. Furloughs and cross-currency headwinds will adversely impact Q3 numbers, but on an aggregate basis, the rate of change is positive, supported by improved decision cycles and discretionary spending, despite the absence of mega deals.

Tech job postings are recovering, tech layoffs are easing, and bank tech spend has improved over the past few quarters, driving growth in banking, financial services and insurance revenue.

On the flipside, recent quarters have seen deal market share losses to global peers, owing to increased competitive intensity in cost optimization deals as well as Gen-AI driven growth.

Current estimates build in profit pools expanding by >35% over FY25-27E, similar to the expansion over FY21-24. The base case of growth acceleration in FY26E remains intact.

However, the sharp valuation rerating implies absolute returns will align more closely with earnings growth. Risk reward is favorable for Tata Consultancy Services, with Persistent remaining the preferred mid-Tier pick.

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