The IT sector experienced a remarkable rebound in 2023, surging by almost 25 percent, largely fueled by expectations of a dovish pivot from the Fed and subsequent low-interest rates encouraging discretionary tech spending globally. However, as Q3 earnings of key players like TCS and Infosys are unveiled, it becomes evident that the anticipated recovery is yet to materialize fully.
Q3 Performance Overview
Market Reaction to earnings:
The market response to the Q3 results of major IT players has been largely positive. Investors seem to be reassured by the absence of negative surprises, even though the sector did not witness a material upturn in demand. However, there is ongoing speculation about whether the worst is truly behind the IT sector.
Individual Company Performances:
Beyond TCS and Infosys, other IT companies have showcased resilience and strong financial performances. TCS achieved a 1% revenue growth, surpassing street expectations, while HCL Tech outperformed with a 6% topline revenue growth. Margins have also been a highlight, with TCS, Wipro, and HCL Tech displaying robust margin performances
Q3 Scorecard (Change%):
Outlook and Guidance:
The management guidance for FY24 growth reflects a cautious yet optimistic stance. Infosys tightened its revenue growth guidance to 1.5-2%, while HCL Tech narrowed its full-year revenue growth guidance to 5-5.5%. Despite the cautious approach, there are positive signals in the form of steady deal wins and notable improvements in attrition rates.
Conclusion: As the IT sector navigates through the aftermath of Q3 earnings, it is evident that while challenges persist, there are positive indicators such as robust margins, steady deal wins, and cautious optimism from management. The market will closely monitor the sustainability and recovery of demand trends, and the sector’s overall resilience as it progresses into FY25.
Market this week
Source: BSE and NSE
Day Leader Board
Stocks that made the news this week:
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