Muted Revenue Growth Casts Shadow Over IT Sector’s FY25 Projections

Market analysts have signaled a cautious tone as the IT sector grapples with subdued revenue growth, with companies adopting a more conservative stance in their projections for the fiscal year 2025. Anticipated delays in execution and project closure activities have prompted this shift, analysts reported on Friday.
CMS IT ServicesThe outlook for revenue growth in FY25 appears bleak, with tier-1 IT companies projected to achieve below mid-single digit growth on average, while tier-2 firms are expected to cap their revenue growth to high-single digits.

Analysts from the financial services organization Prabhudas Lilladher emphasized that the trajectory of spending recovery alongside an anticipated macroeconomic rebound in the near future could prompt upward revisions to these estimates as the year progresses.

The conclusion of FY24 witnessed another quarter of lackluster performance within the IT services sector. Leading IT firms in the country witnessed a reduction of nearly 70,000 employees in the last fiscal year.

Among tier-1 companies, Tata Consultancy Services (TCS) emerged as a relative outperformer, reporting a +1.1 percent revenue growth on a quarter-on-quarter basis, while HCL Technologies (HCLTech) posted a +0.3 percent QoQ revenue growth.

Conversely, Infosys stood out as an outlier, registering another quarter of decline at 2.2 percent QoQ in Q4, compared to a decline of 1 percent reported in Q3, as noted by Prabhudas Lilladher.

IT giant Wipro recorded an 8 percent decline in net profit at Rs 2,835 crore for the January-March quarter, down from Rs 3,074.5 crore in the corresponding period last year. The company’s revenue also witnessed a 4.2 percent decrease to Rs 22,208.3 crore in Q4.

According to the latest Crisil Ratings report, the IT services sector in the country is poised to witness a second successive year of muted revenue growth, projected at 5-7 percent in FY25.

Analysts at Kotak Securities remarked, “Recovery hopes have been pushed back to FY26,” reflecting the prevailing sentiment within the industry.

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