BENGALURU: Though IT services company Tata Consultancy Services (TCS) posted a better-than-expected results and reported a 9% increase in its consolidated net profit for the fourth quarter, its peer Infosys is expected to report only 0.3% quarter-on-quarter revenue growth and Wipro is expected to post revenue degrowth of 0.1% sequentially in rupee terms.
Axis Securities expects the Infosys management to give 4.5% to 6% revenue growth guidance for FY25E. Also, margins are likely to expand marginally because of lower operating expenses.
The second-largest IT services company, Infosys, will announce its results for the March 2024 quarter on April 18, and Wipro will announce earnings on April 19. The brokerage expects Wipro’s operating margins to expand on account of lower onsite expenses.
As per ICICI Securities, Infosys could report a dip of 1.2% QoQ given a higher component of discretionary spending. It expects some traction in communication (ramp up from liberty deal), BFSI (from deals announced in Q4). Sharekhan expects Infosys to report flat EBIT margins. It said, “Sequential weakness is likely to be seen in Tech Mahindra, Infosys, and Wipro with sequential degrowth of 1.3%/0.5% and 0.4% in CC terms.”
In Q3, Infosys missed Street estimates, and posted a 7.3% drop in net profit at Rs 6,106 crore. It had revised its FY24 revenue guidance to 1.5-2% against 1-2.5% it had projected during the September quarter. It maintained its operating margin guidance for FY24 at 20-22%.
According to Sharekhan, most Tier-1 IT services companies are expected to report a muted quarter with constant currency (CC) revenue growth of -1.3-1.6% q-o-q owing to continuation of weakness in discretionary spends and lower revenue conversion.
As Wipro has the highest exposure to BFSI among tier-I at 32.7%, analysts say that the IT company may also be affected in particular given its high exposure to consulting business (12-14% of revenue).
While LTIMindtree is expected to report revenue growth of 1.5% sequentially in rupee terms, operating margins are likely to expand marginally by 30bps. Tech Mahindra is expected to report growth of 0.7% on a sequential basis.
Axis Securities said for the IT services sector, deal wins for the quarter are likely to remain steady, aided by strong demand for newer technologies like Generative AI, Machine Learning, Cloud transformation, and Digital transformations.