IT Services, Internet, Software, KPO Q3 Results Preview - Worst Behind, But Recovery To Be Slow: Dolat Capital

NDTV Profit’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.

DRChoksey Report

For Indian IT Services, Q2 FY25 commentary suggested bottoming of weak growth as evinced by unchanged/slightly upgraded outlook for FY25, flattish headcount growth and nil project cancellations. However, for Q3 FY25, we expect constant currency revenue growth to range between 0.1% to 3.7% for tier 1 names, and between -0.2% to +4% for tier-2 names.

Key reasons for muted revenue growth include:

1. Seasonal furloughs and cross-currency headwinds,

2. Largely unchanged demand environment/macros (as also observed in Accenture’s Q1 FY25 commentary),

3. decline in trailing twelve months- total contract value (at industry level) by 4% YoY (only two of nine under coverage reported growth), suggesting lower short term visibility.

Operating profit margin to see a movement ranging from -117bps to +96bps, with weakness attributed to muted revenue growth and limited margin levers.

Key commentary to watch will be -

1. Client budgeting and spend outlook for CY25 amid change in U.S administration,

2. BFSI spends (fewer than expected rate cuts for CY’25), and

3. Recovery timeline of discretionary spends.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.