BENGALURU: IT services companies might report better earnings in the second quarter of this fiscal year as analysts believe that there have been improvements in decision cycles and that Generative AI deals will be in focus. Tata Consultancy Services (TCS) will announce its results on October 10, followed by HCLTech on October 14. Bengaluru-based IT services companies Wipro and Infosys will post their results on October 17, says an industry preview.
The IT sector growth is in the middle of its recovery, having bottomed out two quarters ago, and is expected to achieve a high single-digit over the next three quarters, said HDFC Securities in its Q2FY25E results preview.
AI is proving to be a net positive for the sector, and with GCC (Global Capability Centre) growth differential peaking, concerns around terminal growth are easing, supporting sustained demand. Despite the absence of mega deals recently, some improvements in decision cycles and discretionary spending can support growth even as the fabric of cost optimisation remains, it added.
LTIMindtree and Infosys are expected to lead growth within tier-I in Q2, followed by TCS, Tech Mahindra, HCLTech and Wipro. TCS’ revenue growth is expected to moderate in Q2, impacted by muted performance ex-India with incremental weakness in Retail & CPG and growth moderation in UK geography (despite recent wins such as Primark, Rolls Royce and Mansfield Building), it said in the note.
It added that Wipro may guide -1 to +1% QoQ for the third quarter despite improvement in US banking and Capco. HCLTech is likely to maintain its 3-5% guidance despite State Street’s dent in Q2 and high growth expectations in Q3.
As far as deal wins are concerned, they are likely to be soft for Tech Mahindra, but there will be an uptick in its margin. The margin guidance of Infosys (20-22%) and HCLTech (18-19%) is likely to be unchanged, said HDFC Securities.
PL Capital said Accenture’s commentary on outsourcing growth for FY25 indicates a positive bias over the consulting business. “The read across Indian IT peers remains positive, as the growth trend and strong bookings within outsourcing are encouraging and should replicate though FY25,” it said.
Accenture’s Generative AI new bookings stood at $1 billion for the September quarter and $3 billion for the full year.