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Bengaluru: The IT sector behemoths are set to announce their earnings for the July-September quarter (Q2FY25) from October 10 onwards, kickstarting with Tata Consultancy Services (TCS). Analysts largely believe that earnings growth in Q2 could be tepid, with pick-up expected in quarters three and four.
“The growth is going to be in lower single digits. It's not going to be multifold. I don't think anyone is expecting that,” Neeti Sharma, CEO, TeamLease Digital, told DH.
The IT earnings will be followed by HCL Tech (on October 14, Infosys (October 17), Wipro (October 17) and TechMahindra (October 19).
“We feel that it is expected to be somewhat sluggish again, but recovery in the second half of the year is expected to some extent, at least some signs of it should hopefully start,” observed Deepak Jotwani, Vice President & Sector Head at ratings and research firm ICRA
Accenture Ltd, which has a large presence in India, announced its results last week, beating estimates and also raised its revenue growth guidance to 3-6%. The optimistic result has boosted some confidence for Indian IT companies’ performance, however, a major turnaround is unlikely, analysts said.
“Accenture has raised the guidance, which shows the sentiments and the macros are changing, in the favour of IT services. They have also raised the guidance and the dealings remain robust for the quarter,” said Omkar Tanksale, Senior Analyst, Axis Securities.
Deal wins
Indian IT companies have been actively pursuing large deals in this quarter, with several deals likely to be converted into billings, adding up to their balance sheet. While sectoral experts differ on these deals likely being shown in the upcoming quarterly results, they see it as a recovery push for these companies.
“Order wins are still coming through, just that conversion of those deals into revenue has become a bit different and it might show in a quarter or two or even later,” said Jotwani.
“We are expecting Indian IT services to remain strong in terms of deal pipelines and a better book-to-bill ratio. So, the majority of the deals are most likely to get converted into the billing,” Axis’ Tanksale said
Hiring peaked for Indian IT firms in fiscal year 2022, and it hasn’t been able to match the level ever since. Additionally, Infosys and Wipro have been under the radar recently over employee hiring concerns.
Experts believe that while hiring is most likely to remain stagnant or at its best see a narrow uptick for Q2.
“We will not see a very massive growth in terms of talent hiring as they are focusing on the automation and rescaling of their existing employees,” said Biswajit Maity, Senior Principal Analyst, Gartner.
Shedding light on the growth guidance, analysts unanimously believe that the IT companies are unlikely to forecast improvement on the outlook announced in Q1.
“We are not expecting any improvement in the guidance for this quarter at least, which might change the next quarter,” said Tanksale.