Systematix highlights that most IT-services stocks trade at multi-year lows and at a significant discount to their 10-year averages, reflecting AI-led deflation, weak demand and macroeconomic headwinds despite resilient margins, cash generation and deal wins. Current multiples imply modest growth expectations, while payout and free-cash-flow yields remain attractive. Lower token costs could also create significant opportunities for leading IT-services firms. The brokerage sees limited downside to valuations from current levels.
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Systematix Report
According to the domestic brokerage firm Systematix, IT services companies are expected to post another quarter of muted growth despite strong seasonality, amid weakness in select verticals, productivity-led pricing pressure, competitive bidding and geopolitical headwinds.
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Margins should remain stable, supported by currency tailwinds and cost controls. Accenture's results point to a strong large-deal pipeline, resilient managed services and growing AI opportunities, but the demand environment remains largely unchanged.
It is expected to stay stable in CY27, with elongated sales cycles and client spending focused on cost take-outs, vendor consolidation, AI and GCC expansion rather than higher overall budgets.
Tech Mahindra and Coforge remains Systematix top picks in the sector.
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The brokerage therefore expects subdued sector growth through FY28E. Infosys may lower the upper end of its FY27E guidance to 2.5%, HCLTech is expected to narrow its guidance to 1.5%–3.5%, while Wipro may guide for -2% to 0% revenue growth in Q3 FY27E.
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