Analysts predict mixed Q2 for Indian IT giants
MUMBAI, INDIA — As the second quarter earnings season approaches, analysts are sharing their expectations for India’s leading IT companies.
Tata Consultancy Services (TCS) is projected to encounter a challenging quarter, whereas Infosys is poised for strong performance, potentially leading revenue growth among large-cap IT firms. In contrast, HCL Technologies (HCLTech) and Wipro are expected to report modest sequential revenue growth in Q2.
TCS faces potential growth challenges
TCS will kick off the earnings season on October 10, but analysts predict it may underperform its peers despite the traditionally strong July-September period for the sector.
Stock broker CLSA has highlighted potential risks to TCS’s sequential revenue growth forecast of 1.8% in constant currency terms, particularly due to a sharp increase in the firm’s contracts with Bharat Sanchar Nigam Limited (BSNL), a state-owned telecommunication company, following the central elections.
Bank of America also noted that demand trends from the first quarter are unlikely to persist, especially in developed markets like the United States and the United Kingdom.
Similarly, capital market firm Ambit Capital warned of possible growth disappointments for TCS. Key areas to watch include reasons for growth stagnation outside India and any revival in the banking sector.
Infosys expected to lead revenue growth
Infosys will report earnings on October 17 and is anticipated to lead revenue growth among large-cap IT companies.
Investment banking firm Morgan Stanley forecasted an organic constant currency sequential revenue growth of 2.8%, while Bank of America is expecting similar growth, including inorganic factors.
Several analysts believe Infosys is likely to upgrade its full-year guidance by 50 basis points despite a projected decline in operating margins due to one-off reversals and large deal investments.
HCLTech and Wipro: Modest growth projections
HCLTech, reporting on October 14, is expected to see modest sequential revenue growth of 0.4% in constant currency terms, according to Morgan Stanley, with Bank of America projecting 1.1% growth in the services segment.
Wipro, announcing results on October 17, is anticipated by analysts to guide third-quarter constant currency revenue growth between -0.5% and 1.5%, driven by strong deal wins.
Tech Mahindra and LTIMindtree: Varied outlooks
Tech Mahindra faces increasing risk levels, with stock valuations surpassing fiscal 2027 margin targets. The company’s reliance on the telecommunications sector remains a concern, as it reports on October 19.
Meanwhile, LTIMindtree remains optimistic due to positive seasonality with key client Microsoft, although recent management comments suggest anticipated demand may not immediately translate into revenue growth.
