IT Services Q3 Preview- Furloughs To Impact Revenues; Supply Side Easing To Aid Margin Expansion: ICICI Direct

ICICI Direct Report

Q3 of last year saw IT companies report strong growth on healthy demand and lower furloughs, which was an aberration to the historical trends where Q3 is seasonally a weak quarter for them.

For Q3 FY23, we expect revenue growth to moderate sequentially (after strong growth reported in H1), on higher than normal furloughs, fewer working days, deferred spending from some clients and a high inflationary environment.

Geography wise, the U.S. market is expected to be impacted by high inflationary pressures while the Europe market is expected to be impacted by energy constraints that are likely to have an impact on the manufacturing vertical.

Vertical wise, some companies have already indicated pain in a few pockets of banking, financial services and insurance (mortgage), retail, hi-tech and telecom, which is expected to continue in this quarter as well in our view.

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