India’s leading software exporters TCS (Tata Consultancy Services) and Infosys will kickstart the fourth quarter earnings season in what is seen as a modest quarter for IT companies.

While TCS will put out its fourth quarter results on April 12, Infosys will declare the same on April 18.

IT companies, as a whole, are expected to put up a muted show in the March quarter, even though no major surprises are likely. Nuvama sees the revenue growth for the industry to be around -1.5% and +4.5%, dragged down by a gradual reversal of furloughs and lower discretionary tech spends.

However, all eyes are on the guidance for the current fiscal year (FY25) as a weak exit to FY24 and a still inconducive demand environment could temper initial FY25 forecasts for most players.

How TCS and Infosys might fare in the fourth quarter

Analysts predict TCS to report industry-leading growth during the March quarter, aided by BSNL deal ramp. The constant currency revenue growth for the company will also likely be better than the peers sequentially in the March quarter.Meanwhile, Infosys might start seeing recovery in earnings from the first quarter of FY25 on expectations of large deal ramp-ups.During the fourth quarter, Kotak Equities estimated 1.7% quarter-on-quarter constant revenue growth for TCS, while Infosys might see a decline of 1.5% on a sequential basis.The March quarter is seasonally weak for Infosys. Sequential decline will be on account of lower revenues from the sale of third party software and weak discretionary spending.

On the margins front, again TCS might outdo the Bengaluru-based peer with a sequential improvement, helped by better employee utilization and pyramid management.

Kotak forecasts a 40 bps decline in Infosys EBIT margins due to wage revision impact and a lack of leverage from growth.

Deal wins for the fourth quarter is likely to be around $10 billion for TCS, they would come around $3 billion for Infosys. Infy has bagged $3.2 billion worth large deals in the December quarter and TCS boasted deals worth $8.1 billion.

Indian IT companies, that issue annual revenue growth guidelines (of which Infosys is among one), are likely to start on a cautious guidance, keeping in mind the ongoing macroeconomic uncertainty and recent forecast cut by Accenture.

Nomura expects Infosys to guide for 2-5% year-on-year revenue growth in CC terms with a 20-22% EBIT margin band for FY25.

Stock outlook

The last few months have been highly volatile for the IT sector, with a strong rally in December and January followed by a sharp correction in March.

CLSA India, meanwhile, has recently upgraded its rating on few frontline tech stocks and even raised price targets for a few of them, even though it expects most of them to offer a conservative outlook amid an uncertain global environment.

TCS has been upgraded to “underperform” from “sell” and the price target has been increased to Rs 4,043 from Rs 3,925. The brokerage has also retained its “outperform” rating on Infosys, but cut the price target to Rs 1,706 from Rs 1,741.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)


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