Bengaluru
: Macroeconomic uncertainty arising from US President Donald Trump’s determination to impose reciprocal tariffs, a common theme for full-year earnings in three of India’s four largest information technology (IT) service companies.
Although U.S. President Donald Trump has suspended all reciprocity tariffs for three months, it will face a 27% tax on exports to the U.S. unless India manages to obtain a trade agreement in this short window.
TCS CEO K. Krithivasan
TATA Consultancy Services Ltd, the largest IT outsourcing company, kicked off the profit season, a somber note that grew the slowest in four years despite beating analyst estimates.
Key points he put forward in his post-graduation media briefing on April 10:
– Uncertainty began to spread in March. TCS is very optimistic about the fourth quarter of February 2024-25.
– Macroeconomic uncertainty leads to project delays and delays in client decisions.
– Decisions are delayed even if they are not cancelled.
– In the March quarter, the company continued to see softness in manufacturing, while the automotive industry faced uncertainty due to the electric vehicle recession.
– It is expected that the fiscal year 2025-26 will be better than 2024-25 after a strong order.
Wipro CEO Srini Pallia
Wipro Ltd’s CEO Peer Srini Pallia responded to his concerns, about a week later. Revenues of India’s fourth-largest IT company fell for the second consecutive year in 2024-25, with its slowest founding beginning. But, like TCS, it beat analyst estimates.
Key points he put forward in postgraduate media interactions on April 16:
– The global industry environment remains uncertain for most of the year, with recent tariff announcements only added.
A more measured approach is expected, especially in two expenditure areas: large transformation plans and discretionary expenditures.
– This macroeconomic uncertainty is expected to affect the revenue growth momentum of the entire sector in the future.
– Tariffs affect sectors such as manufacturing and consumer goods the biggest.
– Even though the trading pipeline is still strong, the waiting-to-see method is being adopted.
Salil Parekh, CEO of Infosys
A day later, despite being more optimistic, the CEO of Infosys Ltd expressed similar concerns. Infosys also expects the slowest fiscal year to begin in a decade.
Key points he put forward at his post-graduation press conference on April 17:
– Customers have not suspended technical spending and the situation may change soon.
– Customers are interested in cost takeaway, automation and efficiency, and mergers.
– Macro uncertainty affects the retail industry, while the decision cycle is expanding to disposable spending and large transactions across regions.
– Pricing environments throughout the business are stable because everything has changed in the macro environment recently.
– Increased edge pressure due to committed spending in data centers.
Analysts’ opinions
Keith Bachman, analyst at BMO Capital Markets:
– There is a directional trend between GDP/economic growth and IT service expenditure.
– It is often considered a source of funds during budget cuts.
– If we enter a recession in the next few quarters, we think IT services growth will be under pressure.
Piper Sandler analysts Arvind Ramnani and John Nutt:
– Its service companies are calling for a cautious approach to client, especially regarding discretionary and large-scale transformation projects.
