IT Sector Q4 Results Preview: Experts predict macro uncertainties to take a toll on Indian tech companies' fourth quarterly results, and also impact their FY26 guidance. Q4 results for FY25 will kickstart with TCS earnings on April 10, followed by Wipro, Infosys, HCL Tech, and Tata Elxsi in the coming days. Overall, the fourth quarter is expected to be soft, with a sequential decline expected in revenue and divergent in EBIT margin.
IT Q4 Results Dates:
The Tata Group-backed TCS is the first in the Indian IT sector to announce its Q4 results on April 10, followed by Wipro on April 16, Infosys on April 17, and Tata Elxsi on April 18. HCL Tech will announce its Q4 results on April 22, while Tech Mahindra is scheduled to present its earnings report card on April 24.
IT Sector Q4 Results Preview:
Brokerage Kotak Institutional Equities said the deterioration in the macro environment will weigh on 4QFY25 numbers and FY2026E guidance. Brokerage Sharekhan predicts Tier-1 IT service companies to report muted Q4FY25 impacted by lower working days and marginal deterioration in demand.
Revenue:
Kotak expects a sequential revenue decline for all large IT companies for the March 2025 quarter due to seasonal weakness, lower billing days and marginal deterioration in demand. Also, the brokerage believes account-specific challenges could weigh on companies such as LTIM.
In the top line, Kotak highlighted that there are exceptions to the gloom, with strong growth likely from PSYS (+3.9%), Coforge (+3.1% qoq) and to a lesser extent Mphasis (+2.8% qoq), enjoying the fruits of large deal wins and bookings in earlier quarters.
Meanwhile, Sharekhan said, Tier-1 IT service companies under coverage are expected to report weak Q4FY25, with CC revenue growth of -1.8% to 0.2% q-o-q weighed by lower working days and marginal deterioration in demand. Cross-currency headwinds impact of ~10-40bps is expected across covered companies. Infosys is likely to lead the decline among Tier-1 companies, with a revenue decline of 1.8% q-o-q in CC. TCS, Wipro, TechM and HCLTech, are expected to decline 0.3%/0.5%/0.6% and 0.7% q-o-q in CC respectively while LTIM is expected to deliver marginal revenue growth of 0.2% q-o-q in CC terms.
Sharekhan further said, "Tier 2 IT service companies are expected to show relatively resilient growth of -0.1% to 13.5% q-o-q in CC. Among Tier-2, LTTS is expected to lead with 13.5% q-o-q growth in CC aided by SWC seasonality and contribution from Intelliswift while Persistent, Coforge and Mastek are expected to grow 4%/3% and 1.8% q-o-q respectively in CC. Birlasoft is expected to report a marginal decline of 0.1% q-o-q in CC."
EBIT Margin Performance:
As per Kotak, tech companies EBIT margins could see divergence in their performance, owing to timings of wage increases and seasonal weakness in certain business segments.
It said, "On yoy comparison, EBIT margin will increase for all large companies, except for TCS. Expect steady to strong margin performance for mid-tier companies, deriving benefits from rupee depreciation and strong growth. PSYS will stand out in margin performance among mid-tier companies."
Moreover, the IT companies under Sharekhan's coverage are expected to post mixed EBIT margins. However, Sharekhan expects EBIT margins for TCS and LTIM are expected to improve ~30 bps each q-o-q while Infosys/HCL Tech is expected to see a ~75/115 bps contraction. EBIT margins for Wipro and Tech M are likely to be sequentially flat.
Under Tier-2 companies, Sharekhan's EBIT margin for LTTS is expected to decline ~110 bps due to Intelliswift and SWC seasonality. EBITDA margin for Intellect design is expected to improve by ~260 bps q-o-q aided by strong revenue growth.
FY26 Guidance:
Trump's tariffs and their uncertainty are likely to keep IT companies on the edge for their FY26 guidance. According to Kotak, most companies were relying on an uptick in discretionary spending for growth in FY2026, noting weak mega-deal signings across the board.
Against this backdrop, Kotak's note said, "We believe Infosys will guide for a conservative 1-4% revenue growth in FY2026. We believe HCLT will guide for 3-5% revenue growth for FY2026, which includes a 100 bps contribution from the CTG acquisition. Wipro's guidance could range from (-)0.5 to +1.5% qoq for 1QFY26. We expect EBIT margin guidance of 20- 22% from Infosys and 18-19% from HCLT for FY2026."
Adding further, Sharekhan expects deal win TCV to be modest for Tier IT service companies with a dearth of mega deals. Infosys and HCLT are expected to provide conservative growth guidance due to uncertainties stemming from the Trump administration policy measures fuelling concerns of increased inflation and economic slowdown. Management commentaries on deal activity across verticals, cues on discretionary and IT budgetary spend in the face of increased uncertainty and progress on Gen AI would be key monitorables.
IT Stocks To Buy?
On the valuation, Sharekhan said that management commentaries in the face of increased uncertainty resulting from the fallout of Trump tariffs would be pivotal in determining the direction and momentum going ahead. With sector valuations around long-term average levels, we believe the recent corrections have turned the valuation reasonable from a medium to long term perspective. We remain positive on the sector from a medium to long-term perspective and advise investment in our preferred picks."
Large-Cap Picks: Sharekhan's top picks are TCS, Infosys, HCL Tech, Tech Mahindra, LTIM.
Mid-Cap Picks: Persistent Systems, Coforge and Mastek are top pick of Sharekhan.
Lastly, Kotak said, " Assuming a no-recession scenario, there are upsides in plenty of stocks. Long-term revenue growth implied in the stock price stands at ~5-7% for many large companies, reasonable in our view. Infosys, TCS, TechM, Coforge and Indegene are our key picks. The key risk to our call is recession in the economy-such a scenario could weigh on multiples."
Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on article mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.
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