The IT sector, which is bracing for the effect of the global slowdown, is set to announce its results for the fourth quarter. Bellwether Tata Consultancy Services (TCS) will be kicking off the earnings season on April 12. Ahead of the earnings season, here are the seven things to watch out for. 

Revenue growth

IT companies are expected to post modest revenue growth in fourth quarter weighed down by macroeconomic headwinds. IT sector revenue estimates for fourth quarter, put out by six prominent brokerages, are split down the middle, with half estimating 1-5 per cent q-o-q growth, while the other projects in the range between -2 per cent to +5.7 per cent.

The slowdown in discretionary spending, decline in demand across the verticals of mortgages, high-tech, retail, telecom, and seasonal weakness will play spoilsports, according to Kotak’s report. Further IT automation in North America and Europe may show delayed spending or may face some spending cuts going ahead, says Axis Securities report. 


Margins are expected to see improvement in the quarter as supply-side constraints ease. Cross-currency tailwinds, higher utilisation, decline in attrition, and lower subcontractor costs will help achieve the same. “This would be somewhat offset by a lack of operating leverage, higher travel costs, elevated sales and marketing spending, likely pricing pressure, and transition costs for some of the cost optimisation/vendor consolidation deals, says Nirmal Bang in a report. Axis Securities expect margins to expand marginally by 50-100 bps.

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However, Phillip Capital has noted that margins will be weak (flat to marginally decline) for large caps (except TCS, LTIMindtree) on lack of growth leverage, while it should expand modestly for others on easing of supply-side pressures. 


Revenue growth guidance provided by companies would indicate the visibility and confidence the companies have for the quarter to come. Guidance for FY24 is expected to be modest due to the higher growth risks and the expected back-ended growth trajectory. 

“We expect Infosys to guide for 5-7 per cent revenue growth. HCLT can guide 5-7 per cent growth for services and 4-6 per cent overall. We expect Wipro to guide a revenue decline of 1 per cent to growth of 1 per cent for 1QFY24. On margins, we expect guidance of 21-23 per cent for Infosys and 18-20 per cent for HCLT,” Kotak noted in its report. 

Deal wins

Deal flow is anticipated to be significantly boosted by cost optimisation deals and vendor consolidation by enterprise clients. Focus on cost take-outs can throw up mid-sized large deals and mega deals. Emphasis would be on ramp-up and revenue conversion timelines of large deals, say brokerages. 

HDFC Securities notes: “As evident in Accenture’s outsourcing bookings, deal flow is expected to remain strong with TCS likely to post over $ 8.5bn TCV (supported by Phoenix, Telefonica, and Bombardier deals), Mphasis likely to post above $300million net new TCV, and Persistent is expected to post $ 400mn total TCV.” 

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Effect of US banking crisis

Given that the BFSI sector is a major revenue-contributing vertical for IT firms, the recent banking fiasco in the US involving Silicon Valley Bank (SVB), Credit Suisse, Silvergate, and First Republic Bank may weigh down tech spending by the sector, thus affecting Indian IT firms. 

“Though the Indian IT services firms do not have meaningful exposure to the affected US regional banks, fears of a banking crisis are expected to impact near-term IT spending by banks and will be the key monitorable during the management commentary,” Motilal Oswal noted in its report. 

Management Commentary 

Management commentary on demand outlook, client spending, deal TCV’s and pipeline, vertical and geography commentary, pricing pressure on realizations, vendor consolidation opportunities, margins, and attrition are to be looked out for.

“Macro uncertainties will likely impact visibility in 1HFY24. Management commentary can be optimistic on 2HFY24, given early visibility of conversion of large deals, captive takeover opportunities, and benefits from vendor consolidation,” Kotak said in a report. 

Hiring and attrition

The IT sector from the past quarter has seen a decline in attrition rates, as demand for talent moderated. Given the current macroeconomic environment headcount addition is expected to be lower and attrition is expected to decline further. As IT freshers are facing issues of delay in onboarding, it is watched out for if IT firms would achieve their fresher hiring targets set earlier.