Q1 IT preview: Weak macros signal dull quarter for IT, firms may narrow guidance

economictimes.indiatimes.com:

Infosys and HCLTech may also trim the upper end of their revenue guidance range for the ongoing fiscal 2024, and the recovery predicted by the IT companies for the second half of the fiscal year is likely to be subdued, they said. The average of five analyst estimates collected by ET suggests Tata Consultancy Services, Infosys, HCLTech and Wipro to report a 0.35% increase quarter-on-quarter revenue for the quarter ended June 30, excluding changes in currency rates. The three months ending June 30 is usually considered a strong quarter for the sector.

TCS and HCLTech will kick off the quarterly results season for India Inc on July 12. Overall, the weakness in demand for these companies would have continued in the first quarter of FY24, with clients focusing on cost and efficiency-driven projects while keeping the non-critical projects on hold, said research house Motilal Oswal. “Though the deal pipeline remains healthy, weak macro will continue to impact revenue conversions, thereby creating near-term pressure on revenues,” analysts Mukul Garg, Pritesh Thakkar and Raj Bhanushali of Motilal Oswal said in a note Monday.

Most of the analysts expect sentiment in the BFS sector, the biggest contributor to Indian IT’s revenue, to remain weak post the Silicon Valley Bank crisis. “There is a fair probability that the upper end of revenue guidance provided by Infosys and HCLTech may be scaled back,” said brokerage Nirmal Bang in a report on Monday. “The upper end of the 4-7% revenue growth guidance given for FY24 is dependent on Infosys winning some mega deals in FY24.