IT Earnings Preview: Four of India's top six IT companies may see revenue decline

Among these four companies, Wipro is likely to see the steepest US Dollar revenue drop at 2.4% sequentially, while Infosys may report a revenue drop between 1.5% to 2%.

HCLTech will benefit from the Verizon contract, the acquisition of ASAP and the seasonal strength in the products business.

In August last year, HCLTech had signed the contract with Verizon, which turned out to be the company's largest ever deal after the renewal with Xerox in 2019, which was valued at $1.3 billion.

HCLTech had acquired the German automotive engineering services company ASAP Group for €251.1 million. The company's ER&D business had contributed close to 15% of the overall topline in rupee terms during the June quarter and was the second largest business segment behind IT & Business Services.

For LTIMindtree, the company had guided for the second half of financial year 2024 to be better and had also mentioned that the December quarter will be better than the September one.

It is possible that revenue growth guidance cuts may continue during this earnings season as well.

Brokerages Kotak Institutional Equities and Ambit are expecting Infosys to cut their revenue growth guidance to between 1% and 2% from 1% to 2.5% earlier for the full financial year.

On the other hand, Goldman Sachs and Morgan Stanley expect Infosys to narrow the growth guidance band to between 1% and 2% from 1% to 2.5% earlier.2

If this does happen, this will be the third cut in guidance by the Bengaluru-based Infosys.

Although HCLTech is likely to outperform peers in terms of revenue growth in US Dollar terms, the company may also end up cutting its organic growth guidance by 50 basis points at the midpoint to 4% to 5% for the Services business and 3.5% to 4.5% for the overall business, according to JPMorgan.

Wipro, which issues guidance for the immediate quarter, is likely to guide for a revenue growth of -1% to 1% for the January to March quarter.

However, on the margin front, both Infosys and HCLTech are likely to maintain their full year guidance, according to most analysts. While Infosys expects margins to remain in the 20% to 22% band, while HCLTech's margin is likely to be between 18% and 19%.

The street will look forward to commentary on demand revival. Investors want to see signs on whether year-on-year revenue growth is bottoming out, what does the budget for calendar year 2024 look like and whether green shoots are emerging in struggling sectors like BFSI, Telecom and Hitech. The Nifty IT index has gained 24% over the last 12 months despite no visible pick-up in demand.

Additionally, this quarter has seen fewer large deal announcements compared to September, and hence, the deal win number may be lower on a sequential basis. This is also the quarter where Infosys saw a large $1.5 billion MoU signed with a global client get terminated.

Most companies are likely to see flat to higher margins on a sequential basis, barring Infosys and Wipro, where wage hikes will impact margins.

Specific to Wipro, the street will be keen on some commentary on the talent management front. Plenty of senior level exits, legal suits and reports of promoters being unhappy with the CEO has kept the stock in the spotlight.

Despite the concerns, most stocks have done well during the October to December quarter in terms of share price performance. While HCLTech, Wipro and Tech Mahindra have seen double-digit returns, Infosys and TCS have underperformed but delivered positive returns.