India's information technology companies are expected to report a soft March-quarter performance, with growth likely to slow due to seasonality, even as margins and guidance commentary take centre stage.
The absence of furloughs in the March quarter is expected to be offset by fewer working days, leading to muted sequential growth across most companies. Analysts expect Tier-1 IT firms to report a narrow range of growth outcomes, while Tier-2 companies may continue to outperform on better deal execution and conversion. Margin performance is expected to remain mixed, with currency movements and cost factors offsetting each other.
The key focus this earnings season will be FY27 guidance, deal win trends, and management commentary on demand, particularly in discretionary spending. Brokerages highlight growing concerns around artificial intelligence-led efficiency gains and macro uncertainty, which could influence growth visibility and valuation multiples for the sector.
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Here's what analysts are expecting from IT sector's Q4 results announcement
Phillip Capital
- Q4 remains seasonally weak, with sequential growth expected in the range of -1.2% to +1.5% for Tier-1 companies and up to 3.9% for Tier-2 players.
- BFSI vertical expected to lead growth across most companies.
- Tier-2 companies likely to outperform Tier-1 on better deal conversion and absence of large client headwinds.
- Margins expected to be mixed: decline for Wipro, HCLTech and LTIMindtree due to wage hikes, M&A impact and software seasonality, while some companies may see expansion from utilisation gains and currency support.
- FY27 guidance to be a key monitorable, with Infosys and HCLTech expected to provide growth outlooks in the low to mid-single digits.
- Deal wins likely to remain steady but constrained by weak discretionary spending, macro uncertainty and limited mega-deals.
- AI-led efficiency gains seen as a structural factor affecting pricing and growth trajectory.
Goldman Sachs
Expects FY27 to remain a subdued growth year, marking a continuation of weak IT services spending trends.
- Discretionary spending likely to remain under pressure amid macro headwinds and AI-driven efficiency gains.
- Revenue growth visibility remains limited, with estimates lowered for FY27 and FY28.
- AI adoption could lead to revenue deflation in the near term, though partially offset by expansion in scope of work.
- Currency depreciation expected to support earnings despite weaker revenue outlook.
- Sees risks to growth from geopolitical developments and potential supply chain disruptions.
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Axis Capital
- Sequential growth expected to decelerate in Q4 due to fewer working days.
- Tier-1 companies likely to report flat to lower margins, while Tier-2 performance remains mixed.
- Growth divergence expected across companies, with some supported by inorganic contributions and others impacted by seasonal weakness.
- FY27 guidance and demand commentary to be key focus areas.
- AI-related concerns expected to keep valuation multiples under pressure until growth acceleration becomes visible.
Citi
- Expects Q4 constant currency revenue growth of -1% to +1% quarter-on-quarter for large IT companies.
- Recovery expected to remain slow and uneven, with macro risks continuing into FY27.
- Margins to be supported by currency movements in the near term.
- Key monitorables include FY27 guidance, deal total contract value trends, discretionary spending outlook and impact of geopolitical developments.
- Expects continued cautious stance on the sector, with preference for select large-cap names.
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CLSA
- No significant increase in AI-led pricing pressure observed in recent contract renewals.
- Demand trends remain stable across key verticals, with BFSI showing resilience.
- Deal pipelines remain strong, though decision-making may see some delays.
- Limited direct exposure to geopolitical risks, but broader macro impact remains a watchpoint.
- AI expected to drive both efficiency gains and new opportunities, with net impact dependent on execution.
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