IT Services Q3 Results Preview - Seasonality-Led Slower Demand To Hurt Growth: Motilal Oswal

Motilal Oswal Report

Our IT services coverage universe is likely to deliver a median revenue growth of 1.9% QoQ and 9.1% YoY in constant currency terms in Q3 FY23E.

The major currencies (euro and British pound sterling) remained stable against U.S. dollar with euro having strengthened ~1%, while pound has weakened ~1% that imply a currency impact of up 40 basis points to down 50 bps.

Growth in Ebit/profit after tax of 5.9%/7.2% QoQ, respectively, to be partly aided by U.S. dollar/rupee depreciation of 3% QoQ, although the positive impact is likely to be muted due to softness in revenue growth and continued supply side pressure.

The weakening macros and recessionary fear have had lesser adverse impact on the overall demand environment than it was anticipated at the beginning of the quarter. However, there are some pockets of weakness remaining in the consumer facing verticals, where the decisions have been delayed and the spending have been cut on the discretionary activities.

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