The technology companies like TCS, Infosys, Wipro, HCL Tech are in focus. The Q4 earnings season kicks off in a matter of days and the marquee tech numbers take the lead in announcing the Q4 performances of the companies. The tech results are particularly important given the uncertainty globally and the economic challenges worldwide. They had guided for a weak quarter. But will there be further ramp down or narrowing down of the margins? Key brokerages estimate growth to be in the slow lane but midcap IT may put up a better show Vs large caps.
Will tech stocks meet Q4, FY25 guidance?
Through the quarter, tech companies encountered instances of some pause and even ramp-downs in some cases. JM Financial expects “the companies to meet the bottom-half of their guidance band. Overall, we expect (1.4)-0.2% cc QoQ growth for large caps. Midcaps under coverage should do better (0.6-3.3%).”
According to analysts, the guidance could be impacted on account of rising uncertainty, especially with reciprocal tariffs about to be rolled out.
JM Financial believes that “the key questions investors need to answer is whether the current uncertainty will defer or derail the recovery. We are, at this stage, leaning towards the “defer” argument.” However, till the clarity emerges, they advise sticking to “players with valuation comfort (TCS/Infosys) and earnings visibility (TCS, Tech Mahindra).”
Motilal Oswal added that “getting our positioning right may reap more rewards than predicting when clients resume spending. Our preference is for bottom-up transformation/margin recovery stocks, rather than names contingent on a top-down discretionary revival.”
Most see midcap IT companies delivering surprises on the positive side.
Tech Q4FY25 preview: Discretionary spend the key factor
Key brokerages highlight that with recovery in discretionary spend less visible, spotlight will be back on larger deals.
JM Financial warns that “any slowdown in US BFSI could be concerning. Though the current environment limits visibility, the baseline hypothesis is deferral in spend, instead of curtailment.” They expect large-deal led growth but margin pressure may continue. According to their report, “FY26 earning resilience will however be higher where margin outlook is strong.”
Motilal Oswal added that the “short-term volatility is likely to delay discretionary spending recovery, prompting us to temper our expectations for a meaningful FY26 rebound, particularly for large-caps.”
Tech Q4 earnings Preview: Top expectation from JM Financial
JM Financial has lowered the FY26E constant currency revenue growth expectation for top 6 IT companies to 2.7-5.8% from 4.4-7.8% . They expect players with a healthy order book (TCS, Infosys, Persistent Systems and Coforge) should see lesser revenue variability.
Here are some stock expectations from JM Financial’s research desk-
–Infosys FY26 guidance to be 3-5% (cc).
–HCL could guide 3-5% too, but aided by 1 ppt in-organic contribution.
–Wipro may guide for -1% to +1% cc QoQ for Q1FY25.
–KPIT may give a 12-14% cc YoY revenue growth guidance
For midcaps, JM Financial’s estimates are largely unchanged. The EPS changes track top-line estimates. Mphasis and KPIT’s deal momentum should sustain, they pointed out.
Tech Q4 earnings Preview: Motilal Oswal expectations
Motilal Oswal pointed out that all eyes now will be on FY26 guidance. They expect
–Infosys to guide for 2.5-5% CC growth for FY26
–HCL Tech’s top end to be in a similar range as Infosys.
-Aggregate revenue for our coverage universe to grow by 7.8% YoY,
-Average EBIT and PAT may grow at 7.1% and 5.7% YoY (all in INR terms).
–TCS growth may be lower at 3.5%.
–Wipro and Infosys: The EPS estimates are 7-10% below consensus
Top recommendations for tech stocks at this hour
JM Financial: TCS and Tech Mahindra are their preferred large cap picks. Among midcaps, they see value emerging in Mphasis.
Motilal Oswal: Downgraded rating to Hold for Infosys and Sell for Wipro.