Shares of Indian IT companies are in the spotlight today after the Nasdaq-listed IT services major Cognizant Technology Solutions, reported its Q4 results that exceeded Wall Street expectations. The Nifty IT Index as well as individual tech counters like Infosys, Wipro, Tech Mahindra and HCL Tech are all in the green even as the markets remain in the red within a right range.
This positive performance from the US-based IT giant Cognizant has sparked interest in the broader IT sector, particularly in Indian IT stocks. Cognizant posted a 6.7% YoY revenue growth for Q4 at $5.2 billion, surpassing analysts forecast of $5.06 billion. The company also raised its quarterly cash dividend by 3%, increasing it to 31 cents per share.
Nuvama says Cognizant Guidance encouraging
Cognizant has guided for a better CY25 than CY24 – both overall and organic. The management gave Q1CY25 revenue guidance of -0.5% to +1% QoQ and guided for +6.5% to +8% growth annually or YoY. For CY25, It also guided for revenue growth of +3.5% to +6% YoY, which includes 250 bps of inorganic contribution.
ALSO READTitan shares slip but brokerages are positive on stock – Find out why?
According to Nuvama, “This translates to organic growth guidance of +1% to +3.5% CC YoY compared to -0.1% CC YoY organic growth in CY24. CTSH anticipates adjusted operating margin of 15.5–15.7%, with a sequential decline in Q1 due to seasonality. Management also highlighted the completion of the NextGen program, with the company incurring USD49mn in restructuring cost in Q4 ($33 million in Q3).”
Kotak Institutional Equities on Indian IT services
Kotak Institutional Equities has maintained a Neutral outlook on the IT services sector, pointing out potential challenges ahead. According to the brokerage, “the industry is likely to face short-term headwinds from the growing adoption of generative AI, which may impact growth by 2-3% starting in CY2025.”
In its report, the brokerage pointed out that competition in the AI infrastructure layer is intensifying, with new language models from DeepSeek showing positive trends. “We believe DeepSeek’s new models are part of a broader trend,” they noted in the report.
The brokerage firm in the report noted some key observations which includes “increased competition in the AI infrastructure space,
» Read More
