Tech Titans TCS, Infosys, Wipro: Anticipating Q1 Results Amid Investor Concerns!

IT major Tata Consultancy Services will announce its Q1 results on July 11, followed by HCL on July 12

During the April–June quarter, the information technology (IT) sector lagged the benchmark equity indices on Dalal Street as low discretionary spending combined with high interest rates continued to sour market sentiment. During the first quarter of FY25, the BSE Sensex gained 7.3%, while the BSE IT index rose 3.67%. All eyes are now on the upcoming quarterly results, which will be released on July 11 by IT giant Tata Consultancy Services and July 12 by HCL.

Observers of the market predict that margin performance will likely vary based on factors such as the wage-hike cycle, increased travel expenses, and the costs associated with closing big sales. We’ll be closely monitoring demand recovery commentary to build confidence in the trajectory of revenue growth over the next year. Additionally, market players ought to focus on demand patterns in the manufacturing, retail, BFSI, communications, and high-tech verticals.

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It is advisable to keep an eye on deal intake and pipeline, attrition and recruiting patterns, advancements in Gen AI, pricing environment, and the effects of insourcing and the GCC on growth.

According to Emkay Global Financial Services, large deal announcements reflect some moderation in deal wins in Q1. “Going ahead, we believe the interest rate cuts will act as a trigger for revival in discretionary spending and an uptick in technology spending. Nifty IT underperformed the broader market by 4% over a period of three month due to delayed demand recovery,” Emkay Global said in a report adding it continues to prefer large caps over mid-caps. In the IT space, Emkay’s pecking order is Infosys, HCL Technologies, Wipro, Tech Mahindra, TCS and LTIM in large caps.

Certainly! Here’s a structured table summarizing the assessment by Emkay for TCS, Infosys, and Wipro’s Q1 results:

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However, Motilal Oswal Financial Services said, “We are on track for one of the weakest first quarters for at least 10 years. The situation, though slightly better, is eerily similar to what we witnessed in H1FY24. We would be looking for signs of recovery in discretionary spending in the form of deal activities, which have been heavily skewed towards cost-takeout projects. However, any disappointment in Q1FY25 could again put pressure on Q2.”

Sharing its projection on Q1 results, brokerage Prabhudas Lilladher said that within Tier-1, it expects Infosys to outpace its peers with 2.2% QoQ CC growth, followed by LTIM and TCS at 1.9% and 1.4% QoQ CC, respectively. In contrast, HCL Technologies and Wipro are expected to post 1.8% and 0.5% drop in revenue. Wipro may see 0.3% revenue growth on QoQ basis.

“Margin recovery is likely to be stable with median margin improvement of 20 bps QoQ. Compensation revision at TCS in Q1 will lead to an EBIT margin decline of 110 bps QoQ, while HCL Technologies is expected to report a margin decline of 70 bps due to missing operating leverage and weakness in high-margin business,” Prabhudas Lilladher said.

Prabhudas Lilladher added that the anticipated recovery in operating performance for Tier-1s in Q1 has led to marginal re-rating across the board.

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