Software & Services share price target

The demand environment in Q3FY25 reflected early signs of stabilization, with slightly improved Total Contract Value (TCV) momentum, supported by small and mid-sized deal conversions. However, large deal closures remained muted, indicating that enterprises continue to maintain a cautious stance, particularly for discretionary-led digital transformation initiatives.

YoY organic growth is expected to decelerate from ~4.5% in 2QFY25 to 0.5% in 4Q. Implies a US$2.6bn annualized organic revenue loss

The Indian IT sector exhibited a marginal improvement in demand during Q2FY25, reflecting early signs of recovery. However, as the industry enters Q3FY25E, growth is expected to moderate, weighed down by seasonal furloughs and typical calendar year-end softness.

Organic growth raised by 100bps to 2.5% on better 1QFY25 (AUG YE) which in turn was driven by strong large order wins in FY24

Over the past few quarters, Indian IT companies have been grappling with weak discretionary spending, delayed client budgets, and persistent macroeconomic challenges. However, the Q1FY25, earnings backed with management commentary, indicated initial signs of recovery, especially in the BFSI vertical.

Our picks from Largecaps: HCL Tech; Infosys Our picks from Midcaps: Persistent Systems; and KPIT Technologies

1.5% LC organic revenue growth at the midpoint FY25 (YE August) is conservative if the US soft landing plays out.

We see downside risk to current Accenture's consensus organic growth estimate of 3.5% for FY25. Assuming 2% inorganic.

For Q1FY25, the performance of IT companies within our coverage in revenue growth was broadly consistent with our estimates.
IT companies witnessed green shots in the BFSI segment, however, clients remain cautious about tech spending highlighting no to little pickup in discretionary spending.

Our top positive plays are: KPIT, Persistent Systems, Coforge Our top negative plays are: SIS