Indian IT giants prepare for Q3 results amid mixed sentiments
BENGALURU, INDIA — As the July-December 2024 quarter draws to a close, India’s leading IT companies — Tata Consultancy Services (TCS), Infosys, and Wipro — are in the spotlight.
Despite Q3 traditionally being a weaker period due to higher furloughs and reduced billable hours, global brokerage CLSA remains cautiously optimistic about improving client sentiment, particularly in the U.S. market.
TCS bets on expanding tech budgets for growth
TCS is optimistic about expanding tech budgets in 2025, a trend expected to follow the recent U.S. election outcome.
According to CLSA, the company foresees a recovery in the banking, financial services, and insurance (BFSI) sector, with growth becoming broader across sub-sectors.
However, HSBC recently downgraded TCS to a “hold” rating, citing valuation concerns and lingering uncertainties around generative artificial intelligence (GenAI).
Infosys faces seasonal challenges in Q3 and beyond
Infosys is navigating a challenging phase as it enters the second half of FY25. CLSA projects Q4 to be even weaker than Q3 due to seasonal factors.
Despite this near-term pressure, HSBC upgraded Infosys to a “buy,” citing its robust long-term growth potential and strategic investments in emerging technologies like AI.
Wipro eyes potential re-rating amid capital allocation hopes
Wipro could see a positive re-rating if it announces changes in capital allocation policies, according to CLSA.
While the company has delivered a solid 20% year-to-date return for investors, it continues to face headwinds from global capability center (GCC) pressures. HSBC maintains a “hold” rating on Wipro but acknowledges its steady performance.
Sector recovery expected by FY26 despite near-term headwinds
The broader IT sector is expected to see growth accelerate to 6-7% in FY26, up from 3-4% over the past two years, driven by recovery in the U.S. market. However, weak European markets and uncertainties around GenAI remain challenges.
CLSA highlights that improving growth prospects could attract investor interest back to IT stocks in 2025 as other sectors face deteriorating demand outlooks.
Investor returns reflect confidence despite challenges
Year-to-date returns for TCS (16%), Infosys (27%), and Wipro (20%) underscore investor confidence despite near-term hurdles.
As of December 19, the Nifty IT index was trading slightly higher at 45,701.95, reflecting steady market interest.
With just days left in Q3, these IT giants are poised for mixed results but remain cautiously optimistic about stronger growth prospects heading into 2025.
