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ICICI Securities Report
IT sector may have slightly better Q2 FY25 earnings as we see-
increased momentum of hyper-scaler growth (AWS/Azure/GC);
strong growth from North America after a lull; and
momentum in healthcare.
The factors leading to the positive turn of events include:
Increased momentum in AI, leading to higher demand for hyperscalers, semiconductors;
investment in digitisation due to technical debt accumulation post a period of solely prioritising cost optimisation;
green shoots in US BFS, and healthcare (indicated in our top client heat map analysis).
It may be mixed for retail, manufacturing. We expect Q2 FY25 to fare slightly better versus Q1, led by the aforementioned tailwinds. Margins may be better QoQ given the absence of wage hikes for most.
Upgrade Mphasis to Add (from Sell). Prefer Persistent Systems for industry-leading growth and anticipated turnaround in hi-tech vertical. Remain bullish on Tata Technologies.
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