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Growth weakening to continue for IT, digital services in Q4

We expect sequential revenue growth of down 1% to up 0.9% in constant currency terms for tier-I IT services companies while down 1.8 to up 3.5% for tier-II companies in Q4 FY23E. Ebit margins are expected to remain flat QoQ led by easing supply side issues, pyramid optimisation offset by muted growth and higher travel costs and will see sequential movement of down 130 to up 200 bps.

  • Our discussion with managements/experts indicate:
  • Muted revenue growth due to recent banking crisis;
  • attrition rates – to decline,
  • tech spending delays by clients to continue and
  • total contract value awards to favor tier-I names.

Recently, Accenture Plc narrowed its guidance to 8-10% in CC for year-ender August 2023 (from 8-11%). It is seeing record new bookings however, management is seeing more caution in North America and thus streamlining operations by removing 19,000 people in next 18 months. Bloomberg

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