Q4 earnings: IT pack seen bracing for muted show amid weak global macros, tight spends

New Delhi: Indian IT companies are seen signing off FY24 on a subdued note with an uncertain global macroeconomic environment dragging tech demand and client spends, analysts said, forecasting modest commentary and cautious tone by the tech pack on FY25 outlook.

The grand IT earnings season opens on Friday with results of Tata Consultancy Services (TCS), followed by Infosys scorecard on April 18 and Wipro on April 19. Tech Mahindra is scheduled to announce Q4 and full-year numbers on April 25, whereas HCL Technologies will declare its numbers on April 26.

Emkay in its quarterly preview recently said subpar growth should persist in Q4 as muted demand trends continue on account of weak discretionary spending and cautious behavior by clients amid uncertain macros.

It predicted FY24 ending on a “weak footing”, and noted that recovery hope has shifted to the second half of FY25.

“Global companies such as ACN (Accenture), CTSH (Cognizant Technology Solutions), and CAP (Capgemini) have also guided for muted growth, particularly during H1CY24 (first half of calendar year 2024), with recovery expected towards the end of CY24,” it said.

Motilal Oswal, in its results preview for the sector, said while the sequential revenue growth for IT companies should see an improvement due to a low base of the December quarter (on account of seasonality), the year-on-year growth continues to remain “anemic”. According to it, an uncertain macroeconomic outlook continues to dampen the demand environment for the IT services industry in Q4FY24.

“This should result in the weakest sector annual growth (median growth of 4.9 per cent on year on year) since 2008-09 financial crisis (excluding pandemic impacted FY21),” Motilal Oswal said in its report.

While discretionary spends continue to be under pressure, there is no meaningful change in industry spending patterns.

“We factor in demand improvement in FY25 on the back of positive outlook from US fed and large order backlog; however, the certainty of this translating into tangible growth remains uncertain,” it said.