The technology companies like TCS, Infosys, Wipro, HCL Tech are in focus. The Q4 earnings season kicks off in a matter of days and the marquee tech numbers take the lead in announcing the Q4 performances of the companies. The tech results are particularly important given the uncertainty globally and the economic challenges worldwide. They had guided for a weak quarter. But will there be further ramp down or narrowing down of the margins? Key brokerages estimate growth to be in the slow lane but midcap IT may put up a better show Vs large caps.
Will tech stocks meet Q4, FY25 guidance?
Through the quarter, tech companies encountered instances of some pause and even ramp-downs in some cases. JM Financial expects “the companies to meet the bottom-half of their guidance band. Overall, we expect (1.4)-0.2% cc QoQ growth for large caps. Midcaps under coverage should do better (0.6-3.3%).”
According to analysts, the guidance could be impacted on account of rising uncertainty, especially with reciprocal tariffs about to be rolled out.
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JM Financial believes that “the key questions investors need to answer is whether the current uncertainty will defer or derail the recovery. We are, at this stage, leaning towards the “defer” argument.” However, till the clarity emerges, they advise sticking to “players with valuation comfort (TCS/Infosys) and earnings visibility (TCS, Tech Mahindra).”
Motilal Oswal added that “getting our positioning right may reap more rewards than predicting when clients resume spending. Our preference is for bottom-up transformation/margin recovery stocks, rather than names contingent on a top-down discretionary revival.”
Most see midcap IT companies delivering surprises on the positive side.
Tech Q4FY25 preview: Discretionary spend the key factor
Key brokerages highlight that with recovery in discretionary spend less visible, spotlight will be back on larger deals.
JM Financial warns that “any slowdown in US BFSI could be concerning. Though the current environment limits visibility, the baseline hypothesis is deferral in spend, instead of curtailment.” They expect large-deal led growth but margin pressure may continue. According to their report, “FY26 earning resilience will however be higher where margin outlook is strong.”
Motilal Oswal added that the “short-term volatility is likely to delay discretionary spending recovery,
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