Tata Consultancy Services, Infosys all set to announce Q4 results today. Here's what you can expect

Edelweiss estimates the top five IT players -- TCS, Infosys, Wipro, HCL Tech and Tech Mahindra -- will clock around 2-3% quarter-on-quarter growth in Q4

By Rukmini Rao  
Thursday, April 11, 2019

Tata Consultancy Services (TCS) and Infosys are all set to announce their March quarter results for financial year 2018-19 on Friday, kicking off the earnings season on Dalal Street. This is for the first time the two largest IT services companies will report their numbers on the same day. Analysts believe TCS and Infosys will continue to sustain revenue growth momentum in the fourth quarter (Q4).

Edelweiss estimates the top five IT players -- TCS, Infosys, Wipro, HCL Technologies (HCL Tech) and Tech Mahindra (TECHM) -- will clock around 2-3 per cent quarter-on-quarter growth in constant currency (cc) terms in Q4, while digital and large transformational deal-wins are likely to drive the revenue growth and also form the base for a positive management commentary. Here is what you need to look out for in the results of these companies:

Infosys

Infosys, which raised its FY19 guidance in the third quarter (Q3) to 8.5-9 per cent from the earlier 6-8 per cent, is expected to clock around 1.9-2 per cent sequential growth in constant currency terms, estimate analysts. However, they feel, its EBITA (earnings before interest, taxes and amortisation) margins might see cross-currency tailwinds as a result of rupee appreciation. Analysts also expect the company to guide a revenue growth in the band of 8-10 per cent for the financial year 2020 (FY20). While the management has a positive outlook on the demand environment, commentary around pricing outlook, deal pipeline and digital growth, will set the tone for this fiscal. The commentary around headwinds such as trade wars and uncertainty around Brexit will also be a critical factor to watch out for to understand the growth momentum in FY20.

TCS

While the company does not provide any revenue guidance, according to analyst estimates, it is expected to clock 1.8-2 per cent revenue growth quarter-on-quarter. Analysts believe margins may see some improvement thanks to rupee appreciation but that could be offset by operational efficiencies. With large exposure to the banking vertical, management commentary around client budgets and spends, especially in the BFSI (banking, financial services and insurance) space, will be closely watched. Currently, with 30.1 per cent revenues coming in from digital and the recent deal-wins, specific commentary around digital deals will provide further clarity on the revenue momentum in FY20. However, broking and research firm Nirmal Bang expects the company's growth to be a bit slower in FY20. The firm in its note dated March 18 said, "We are a bit more positive on its FY20 revenue outlook. While it (TCS) stated that the current momentum in most verticals would take TCS to double-digit growth in FY20, we still believe it may fall a tad shy off double-digit."

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