Companies

Q2 outlook: Infosys, TCS set to perform better

K Giriprakash Bengaluru | Updated on October 01, 2019 Published on October 01, 2019

Infosys and TCS are expected to put up a good performance during the second quarter results while Wipro might come out with weak revenue growth.

Analysts tracking the domestic IT sector said EBIT margin is expected to decline for all companies except Wipro on a year-on-year basis because of increase in US cost structure, investments to grow a digital business and transition costs in large deals.

In an interview with BusinessLine, Cognizant CEO, Brian Humphries said while the IT sector growth will remain robust in the coming years, most of the market is rapidly shifting to digital. “The overall numbers are changing and within those pillars, the traditional business is either flat to slightly declining while the digital business is growing 10 to 12 per cent,” Humphries said.

Read the interview here | We need to get back to being the bellwether

But analysts pointed out that the slowdown in BFS spending and client-specific challenges are soft spots. “Revenue growth will be mixed and driven by seasonal strength and client-specific challenges,” Kotak Institutional Equities in a note to its investors said.

Kotak said it forecasts 3.5 per cent quarter-on-quarter growth for Infosys with 60 basis points contribution from Stater acquisition. It said strong revenue growth in Infosys will be aided by the ramp-up of large deals and broad-based strength across verticals. It said there could be a 2.6 per cent quarter-on-quarter revenue growth for TCS with challenges in financial services and retail verticals. But despite a seasonally strong quarter, Wipro is likely to disappoint with 1.2 per cent quarter on quarter revenue growth for the September 2019 quarter.

Revenue growth for HCL will be powered by the completion of the acquisition of select IBM products. Underlying organic growth will likely be weak at 0.7 per cent QoQ due to productivity commitments in large IMS projects and relatively high base of the previous quarter. We expect modest growth of 1.7 per cent in Tech Mahindra with weak growth in the enterprise segment. Hexaware will lead revenue growth in mid-tier companies helped by consolidation of Mobiquity acquisition.

Published on October 01, 2019
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