With the looming uncertainty due to rising trade tensions and economic uncertainties on the back of Trump tariffs, brokerage firms are trimming their earnings estimates for the IT services players. In line with this, InCred Equities has trimmed its earnings estimates for Tata Consultancy Services (TCS) to ‘account for tariff-led uncertainty’. The brokerage firm had, earlier last month, also maintained that the news flow on tariffs from the US is not constructive for earnings upgrade and decision-making, and that the “first-order impact could be trimming of P/E multiples followed by a second-order impact of potential earnings downgrade”.
“The Nifty IT Index has underperformed the Nifty Index by ~7 per cent YTD and ~1 per cent since 2 Feb 2025. In this backdrop, we review and trim our earnings estimates to account for a potential 1) slower global growth, 2) change in the clients’ IT spending pattern due to the impact of tariffs, and 3) pass-back of productivity gains led by infusion of artificial intelligence (AI),” InCred Equities said.
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Earlier, JM Financial had also maintained that rising trade tensions and economic uncertainties are adding new challenges for the IT services sector. It had said that tariffs and counter-tariffs have increased market instability, while inflation concerns and delays in interest rate cuts have worsened the outlook.
While the IT companies were initially cautiously optimistic citing improvements in short-duration deals and continued BFS sector spending, recent geopolitical and macroeconomic developments including rising trade tariffs and inflationary pressures, have introduced fresh uncertainties.
US President Donald Trump, on Monday, announced that tariffs on Canada and Mexico would be imposed as scheduled, remarking, ‘’No room left for Mexico or Canada. No, the tariffs you know, they are all set. They go into effect tomorrow.’’ In February, he had levied a 25 per cent tariff on imports from Mexico and Canada along with a 10 per cent tariff on goods from China.
US$ revenue CAGR trimmed over FY25F-27
InCred Equities said, “We trim Q4FY25F US$ revenue QoQ growth to 0.6 per cent and now model in a 4.5 per cent US$ revenue CAGR over FY25F-27F, vs 7.5 per cent earlier,
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