The IT sector, during the fiscal second quarter, reported in-line operating performance, moderate deal wins and a weak second half outlook. While last year’s record deal wins have supported H1Y25 growth, stable leakages have helped too, though sporadic instances of ramp-downs still linger, stated a report by JM Financial. “FY24’s deal revenues in the base and FY25 deal TCV (FYTD) reverting to historical trend however preclude hopes of growth acceleration. Not surprisingly, most available guidance for H2 underwhelmed,” it said.
The sharp moderation in deal TCV, according to the report, could be explained by two factors – one, stock of mega deals being exhausted as enterprises are done with the bulk of their cost reset, and vendor consolidation exercises; two, ACN has gained share after its recent pivot towards large transformational deals.
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More beat than misses
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On a sequential basis, top 6 players in the segment reported 0.6 – 3.1 per cent CC growth in Q2. Hit to misses ratio improved further with no misses. Top 5 cumulatively added $350 million of organic incremental revenues QoQ, closer to their long-term trend growth, though favourable FX helped. Even as this suggests normalising leakages, JM Financial said, companies did report client specific ramp downs.
Further, mid-cap companies outpaced larger peers by a margin with both Persistent Systems and Coforge growing at more than 5 per cent. Barring TCS (BSNL-led growth impact), most players met margin expectations, maintained the report, while adding that Tech Mahindra surprised positively again on margins as it made steady progress on turnaround.
Outlook and guidance
Improvement in BFSI was unequivocal. Infosys saw discretionary spend sustaining in capital markets, mortgages and card & payments. HCL saw better discretionary in the Tech sector too, though it was not echoed by others. “Few pockets of stress emerged too e.g Manufacturing in the EU, especially Auto and Aero.
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