India's IT services companies to report subdued growth during 4QFY25: Report

India's information technology sector is expected to report subdued growth for the fourth quarter of FY25 (January-March period), according to a report by Systematix Institutional Research.

The report attributed this slowdown to seasonal weakness and reduced discretionary spending on digital transformation projects by global clients.

It said, "We expect IT services companies within our coverage to report subdued growth during 4QFY25 on seasonal weakness and lower discretionary digital transformation spends."


It also mentioned that Indian IT companies, which earn a major share of their revenues from the US market, continue to face a challenging business environment as the US deals with macroeconomic uncertainties.

Just as the sector was hoping for a recovery in discretionary tech spending, the report stated that the situation has become more complex due to fresh tariff announcements by the Trump-led administration, recessionary concerns, and a cut in IT budgets by Elon Musk-led DOGE.

These developments are causing delays in large-scale tech transformation projects. Instead, clients are now focusing on cost-saving measures, including vendor consolidation and budget reallocation, which is affecting new project flows and revenue visibility for IT firms.

The report expects large-cap Indian IT companies to post a quarter-on-quarter revenue decline of 0 to 2 per cent in dollar terms. Among the major players, Tata Consultancy Services (TCS) is likely to see revenue pressure due to a ramp-down in its deal with Bharat Sanchar Nigam (BSNL).

Infosys and HCL Technologies may experience a dip in revenues due to seasonal factors, while Wipro, Tech Mahindra, and Sonata Software are expected to report weaker results due to company-specific challenges.

Despite the pressure on revenue, EBIT (earnings before interest and tax) margins are expected to remain largely stable across companies.

However, margins for Infosys and HCL Technologies could be slightly affected due to seasonality and wage increases.

Overall, the outlook for the IT sector remains cautious, as companies brace for a quarter marked by soft demand, client budget tightening, and global economic uncertainties.