May 10th 2024.
In recent news, it has been noted that the IT sector is experiencing a decline in revenue growth. This has led to companies becoming more cautious in their projections for FY25, taking into account expected delays in project executions and closures. According to market analysts, the outlook for revenue growth in FY25 is not very promising, with tier-1 IT companies projected to report below mid-single digit growth, while tier-2 firms are expected to cap their growth at high-single digits.
However, there is a possibility for an upward revision in estimates if there is a recovery in spending and an anticipated macro recovery in the near future. This could lead to better performance for companies as the year progresses, according to analysts from financial services organisation Prabhudas Lilladher.
The previous fiscal year, FY24, ended with weak performance in the IT services sector. Major IT companies in the country saw a decrease of around 70,000 employees. Among the tier-1 companies, Tata Consultancy Services performed relatively better and reported a 1.1% revenue growth, while HCLTech saw a 0.3% increase in revenue quarter-on-quarter.
On the other hand, Infosys has been an outlier, reporting a decline of 2.2% quarter-on-quarter in Q4, compared to a decline of 1% in Q3, according to Prabhudas Lilladher. Another major IT company, Wipro, also reported a dip in net profit at Rs 2,835 crore for the January-March quarter, down from Rs 3,074.5 crore in the same period last year. The company's revenue also saw a decrease of 4.2% to Rs 22,208.3 crore in Q4.
According to a report by Crisil Ratings, the IT services sector in the country is likely to witness another year of muted revenue growth, projected at 5-7% in FY25. Analysts at Kotak Securities note that recovery hopes have now been pushed back to FY26.
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