Four of India’s top six IT companies may see revenue decline

This quarter is likely to be a weak one for these companies due to seasonality factors, higher-than-usual furloughs and weakness in discretionary demand.

While the December quarter is generally seen as a weak one due to the holiday season, the seasonality is higher than usual.

Among these four companies, Wipro is likely to see the steepest US Dollar revenue drop at 2.4% sequentially, while Infosys may report a revenue drop between 1.5% to 2%.

Why Will HCLTech & LTIMindtree Buck The Trend?

In August last year, HCLTech had signed the contract with Verizon, which turned out to be the company’s largest ever deal after the renewal with Xerox in 2019, which was valued at $1.3 billion.

For LTIMindtree, the company had guided for the second half of financial year 2024 to be better and had also mentioned that the December quarter will be better than the September one.

Guidance Cuts May Continue

It is possible that revenue growth guidance cuts may continue during this earnings season as well.

Brokerages Kotak Institutional Equities and Ambit are expecting Infosys to cut their revenue growth guidance to between 1% and 2% from 1% to 2.5% earlier for the full financial year.

On the other hand, Goldman Sachs and Morgan Stanley expect Infosys to narrow the growth guidance band to between 1% and 2% from 1% to 2.5% earlier.2

If this does happen, this will be the third cut in guidance by the Bengaluru-based Infosys.

However, on the margin front, both Infosys and HCLTech are likely to maintain their full year guidance, according to most analysts. While Infosys expects margins to remain in the 20% to 22% band, while HCLTech’s margin is likely to be between 18% and 19%.

What Is The Street Likely To Focus On?

The street will look forward to commentary on demand revival. Investors want to see signs on whether year-on-year revenue growth is bottoming out, what does the budget for calendar year 2024 look like and whether green shoots are emerging in struggling sectors like BFSI, Telecom and Hitech. The Nifty IT index has gained 24% over the last 12 months despite no visible pick-up in demand.

Most companies are likely to see flat to higher margins on a sequential basis, barring Infosys and Wipro, where wage hikes will impact margins.