BENGALURU
:
Macroeconomic uncertainty, induced by US President Donald Trump’s resolve to impose reciprocal tariffs, was the common theme when the bosses of three of India’s four largest information technology (IT) services firms spoke about their full-year earnings over the last two weeks.
Though US President Donald Trump has suspended all the reciprocal tariffs for three months, unless India manages to secure a trade pact during this brief window, it will face a 27% levy on its exports to the US.
K. Krithivasan, CEO of TCS
The largest IT outsourcer, Tata Consultancy Services Ltd, kicked off the earnings season on a sombre note, growing the slowest in four years despite beating analyst estimates.
The key points he made during TCS’s post-earnings media briefing on 10 April:
-Uncertainty started creeping in March. TCS was optimistic about the fourth quarter of 2024-25 until February.
-Macroeconomic uncertainty led to project delays and deferrals in decision-making by clients.
-Even as there were no cancellations, there were delays in decision-making.
-In the March quarter, the company continued to see softness in the manufacturing sector, while the auto industry faces uncertainties due to EV downturn.
-The fiscal year 2025-26 is expected to be better than 2024-25 on the back of a strong order book.
Srini Pallia, CEO of Wipro
His concerns were echoed by peer Srini Pallia, CEO of Wipro Ltd, almost a week later. India’s fourth-largest IT firm, which saw its revenue decline for the second consecutive year in 2024-25, forecast its slowest start to a fiscal year. However, much like TCS, it also beat analyst estimates.
The key points he made in the post-earnings media interaction on 16 April:
-The global industry environment remained uncertain for most of the year, and the recent tariff announcements have only added to that.
-Clients are expected to take a more measured approach, especially in two spending areas: large transformation programmes and discretionary spending.
-This macroeconomic uncertainty is expected to impact revenue growth momentum across sectors in the future.
-The tariffs impact sectors like manufacturing and consumer goods the most.
-Clients are adopting a wait-and-watch approach even as the deal pipeline remains strong.
Salil Parekh, CEO of Infosys
A day later, though a little more optimistic, Infosys Ltd’s CEO voiced similar concerns. Infosys, too, projected its slowest start to a fiscal year in over a decade.
The key points he made during the post-earnings press conference on 17 April:
-Clients have not paused tech spending, and the situation could change quickly.
-Clients are interested in cost takeout, automation and efficiency, and consolidation.
-The macro uncertainty has impacted the retail sector, and decision cycles are getting stretched for discretionary spending and large deals across geographies.
-Pricing environment is stable across the overall business because everything that has changed in the macro environment has been recent.
-There is increased pressure on margins due to committed spending on data centres.
Analysts’ take
Keith Bachman, analyst at BMO Capital Markets:
-There are directional trends between GDP/economic growth and IT services spend.
-IT services are often considered a source of funds in times of budget cuts.
-If we enter a recession over the next few quarters, we think IT services growth will be pressured across the board.
Piper Sandler analysts Arvind Ramnani and John Nutt:
-IT services companies are calling out a cautious client approach, particularly regarding discretionary and large-scale transformation projects.
