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ICICI Securities Report
We expect IT companies under our coverage to report soft QoQ constant currency revenue growth in Q4 FY24 due to slower recovery in key verticals of banking, financial services and insurance, retail and communication. There were negligible cross-currency tailwinds in Q4.
We expect margins to see slight QoQ respite due to absence of furloughs and wage hikes versus Q3. Signs of improvement in IT spending in the near term remain elusive, with continued scrutiny over discretionary spends and focus on cost optimisation (also indicated by Accenture Plc. guidance cut for FY24).
Though U.S. Fed's recent indication of three rate cuts in CY24 may be a positive, an improvement in IT spending in FY25 is already built into our estimates.
We now model a slower pace of recovery than envisaged earlier, and thus cut FY25/26E revenue growth estimates by 2-5% for our coverage companies on a weak FY24 exit.
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