IT Services Q2 Result Preview – Slowly Shaping Up; Recovery Expected: Axis Securities

Axis Securities Report

The IT Services sector is anticipated to exhibit moderated growth in Q2 FY25, primarily due to weaker discretionary spending, driven by uncertainties in macroeconomic conditions and upcoming elections in the U.S.

However, non-discretionary spending is expected to see some improvement. Many large enterprises are likely to prioritize cost optimizations, resulting in an increase in cost take-out deals, vendor consolidation, and reduced discretionary spending. We are also expecting new deals to ramp-up indicating pick up in demand.

Industries such as banking, financial services, manufacturing, telecom, retail, and hi-tech are expected to show some recovery, with new deal ramp-ups contributing to a growth momentum. It is believed that the sluggish growth trend is bottoming out with no further decline in demand anticipated. This is paving the way for a strong recovery in the near term. H2 FY25 is likely to witness better engagement and higher growth momentum compared to H1 FY25.

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