With the start of October we are all awaiting the next set of quarterly financial results from the Indian IT companies, with an expectation of strong growth acceleration during 2QFY22 (see details of the last quarter here).
Accenture the global technology behemoth which reported its FY21 (August 2021 ending) results last month highlighted that the industry is currently at an early stage of a technology upcycle and they expect a strong multi-year cycle of strong growth (Read key numbers reported by Accenture and how it reads well for the Indian IT industry here). This trend has set the tone for industry growth in the coming quarters, re-emphasizing the double-digit growth trend for FY22 as the underlying theme for the industry.
Q2FY22 is seasonally a strong quarter for Indian IT companies, with that let us look at the top 10 messages that we expect from the Indian IT companies as they start reporting the quarter’s results this month:
- Robust deal pipeline: The deal momentum witnessed during the last quarter is expected to continue, indicative of strong order bookings for 2QFY22 with the domination of small-mid size deals expected to continue.
- Digital will continue to drive the strong demand sentiment: Cloud, Customer Experience and Data will continue to be the key driving themes behind the strong digital transformation demand.
- Growth in revenues: Most companies are expected to report sequential growth in revenues between 4%-7%, driven by resilient demand and deal ramp-ups despite some cross-currency headwinds.
- Digital Revenues: Digital revenues are expected to witness an uptrend, with an increased share in total revenues.
- Growth momentum across major geographies: Both North America and Europe are expected to maintain a healthy growth trajectory. Revenues from India which were down sequentially last quarter are expected to normalize this quarter.
- Broad-based growth across all segments: BFSI and Hi-Tech are expected to lead in terms of growth; retail and manufacturing are also expected to witness an upswing. Broadly all major segments are expected to maintain growth this quarter as well.
- Margins are expected to remain under pressure: Supply-side challenges including higher retention costs, increased fresher hiring, higher localization in absence of travel; are all creating pressure on the margins which are expected to remain flat/decline slightly (~50 bps) compared to last quarter, with the pressure being offset by offshore growth and efficiency gains.
- Hiring to remain strong: To ease supply pressures companies will continue to hire, as attrition is expected to remain high. Utilization could see a slight downtrend as campus hires join the workforce. Overall, the year will see an increased focus on re-skilling and hiring for niche skills as the demand for new-age digital skills continues to increase.
- FY22 Guidance will be restated: We expect companies to reiterate guidance for FY22 with a few expected to report a potential upside on growth.
- Double-digit growth is the riding theme for FY22: Overall, we expect companies to maintain a positive commentary providing more growth visibility for the coming quarters.
With these expectations, we look forward to analyzing the actuals reported by the Indian IT companies in the coming months and present our consolidated view on the industry.
Read more details on how the operating metrics shifted across the Indian IT companies in 1QFY22 in our latest Quarterly Industry Review. Stay tuned for more updates on Industry Performance at NASSCOM Community. Happy Reading!!
Source: Company News and Analyst Reports