Major Indian IT firms have trimmed their revenue growth guidance as companies lack visibility of the demand environment with macroeconomic conditions remaining uncertain.
In Q2, Infosys trimmed its annual guidance from 1-3.5 per cent to 1-2.5 per cent after a deep slash in the previous quarter as well. Wipro narrowed its sequential guidance to -3.5 to -1.5 per cent from -2 to 1 per cent last quarter and HCLTech narrowed its guidance from 6-8 per cent to 5-6 per cent.
Companies have reduced revenue growth guidance as revenue growth is moving on a slower momentum with deal bookings not immediately translating to revenues and discretionary spending not picking up.
Infosys CEO Salil Parekh noted, “The discretionary and the large transformation programs have reduced significantly, and decision-making continues to be slow. The volumes are still under constraint and the guidance is given based on these factors.”
Bearish sentiment
Similarly, Wipro remained bearish as the company was seeing the impact of the slowdown on multiple verticals such as consumer goods, communications, technology, and more so in BFSI. Additionally, high exposure to consulting is being killjoy.
Omkar Tanksale, Research Analyst at Axis Securities, said, “With macro-economic conditions and geopolitical tensions still stretching, enterprises are still uncertain if an economic downturn would hit. This leads to lack of visibility on deal billing and deal ramp-ups for IT companies, thus the guidance has been trimmed.”
In North America, one of the highest revenue-contributing regions for Indian IT firms, the inflation rates remain high, reflecting an effect on tech spending. Additionally, Q3 is a seasonally weak quarter with higher furloughs and limited billing, these factors too result in companies being modest on the guidance front, he added.
Not just the top-tier IT companies, mid-tier IT firms too have cut their guidance. L&T Tech Services reduced guidance from 20 per cent to 17.5-18.5 per cent, as it sees continued caution in the market and decision-making remains slow. Bengaluru-based Happiest Minds has reduced the guidance to 12 per cent on an organic basis, as the company has not been able to close acquisitions in the last two quarters. Previously it has guided 25 per cent revenue growth for the year, without making a distinction between organic and inorganic growth.