IT services: Q2 FY23 earnings results kick off today with TCS reporting after markets

Tata Consultancy Services, India’s biggest IT services company, will be first off the block in reporting fiscal second-quarter earnings results when it reports its numbers after markets in Mumbai today. Analysts at brokerages in India expect growth to continue, and the high staff churn too in the sector. The rate of growth, however, definitely seems to be headed for a slowdown. Infosys, India’s second-biggest IT company, will report its earnings on Oct. 13. Notes: Tata Consultancy Services, India’s biggest IT services company, will be first off the block in reporting fiscal second-quarter earnings results when it reports its numbers after markets in Mumbai today. While TCS offers no projections, the numbers and the top executives’ commentary should indicate the impact of the ongoing global economic slowdown. Analysts at brokerages in India expect growth to continue, and the high staff churn too. The rate of growth, however, definitely seems to be slowing down. “The revenue growth of Indian IT companies is expected to continue in Q2,” Research Analysts Sameer Pardikar and Sujay Chavan write to clients in a note on Oct. 4. Concerns about the slowdown – and a possible slackening of the demand that had jumped because of the Covid pandemic – have already sent the shares of the top Indian IT companies lower by more than 25 percent this year, as part of a global tech-led selloff. The S&P BSE Information Technology Index – which includes companies such as TCS, Infosys and Wipro as well as smaller companies such as Mindtree and KPIT Technologies – is down 26.2 percent since the beginning of 2022. “The demand environment is expected to be strong in the second half of the current calendar year due to continued deal momentum led by sectors like BFSI, insurance, and retail, but we need to be watchful on how macro, as well as geopolitical risks, play out,” in the second half of the current fiscal year that ends March 31, 2023, the analysts write. They expect Bengaluru’s Infosys, the second largest Indian IT company, to report the most growth among the top five leaders, at a 3.5 percent quarter-on-quarter increase in revenues in dollar terms. The ICICI analysts expect TCS to report 1.5 percent sequential growth and 1.2 percent for HCL Technologies and 2.5 percent for Wipro. The outsourcing business at Accenture, the world’s biggest professional services and consulting company, is often seen as a proxy by analysts for how demand is shaping up for companies like TCS and Infosys. Accenture’s outsourcing business, which was 46 percent of its revenues in its fiscal fourth quarter that ended Aug. 31, rose 16 percent year on year in dollar terms, and 23 percent in local currency, according to the company’s press release on Sep. 22. For its fiscal year 2023, Accenture expects revenue growth in the range of 8 percent to 11 percent in local currency. In comparison, revenues rose a record 26 percent in local currency and 22 percent in dollar terms for FY22. The company’s forecast factors in a negative 6 percent foreign exchange impact on its US dollar numbers in its current fiscal year. Among India’s top IT companies, one data point of interest will be Infosys’s forecast for its full fiscal year. Most analysts are expecting the company to maintain the 14-16 percent projection the company made in July. Infosys will report its second-quarter results on Oct. 13. Theme music courtesy Free Music & Sounds: https://soundcloud.com/freemusicandsounds