India’s IT services sector is forecast to report another quarter of tepid growth on account of weak discretionary spending in key geographies.

Tata Consultancy Services (TCS) will kick off the earnings season on Friday when it declares the scorecard for the fourth quarter ended March 31.

The focus will be on the management outlook for 2024-25 particularly whether there will be any demand improvement in an year that could see the US Federal Reserve cutting rates.

Brokerages, however, expect TCS to perform better than other biggies such as Infosys and HCL Technologies on account of large deal ramp-ups and better operational efficiencies.

“IT services sector is expected to report muted growth in the fourth quarter of 2023-24 primarily on account of a weaker discretionary spend due to challenging times in the world’s largest economies,” analysts at Axis Securities said in a note.

“IT automation in North America may show delayed spending or spending cuts moving forward. We believe many large enterprises will shift their focus on cost optimisations, resulting in higher cost take-out deals, vendor consolidation, and lower discretionary spend.’’

Analysts expect TCS to report net profit in the range of Rs 11,400-12,300 crore during the quarter ended March 31, 2024. This could imply a year-on-year growth of up to 8 per cent.

On the revenue front, Axis Securities expects the country’s largest IT services firm to post a topline of Rs 61,077 crore, which is a 3.2 per cent growth over Rs 59,192 crore in the same period of the previous year and a 2.3 per cent rise over the preceding three months.

BNP Paribas has forecast TCS to report a net profit of Rs 12,042.4 crore and revenues of Rs 61,402 crore. In US dollar terms, it expects the revenue to come at $7.3 billion, a 1.3 per cent sequential increase.

India’s second-largest IT services firm Infosys is expected to report a net profit of around Rs 6,200 crore in the January-March 2024 quarter against Rs 6,129 crore in the same period of the previous year.

The Bengaluru-based company is forecast to declare revenues of around Rs 39,000 crore against Rs 37,441 crore in the year-ago period.

HDFC Securities expects the company to guide for 3-5 per cent growth in this fiscal. In January this year, Infosys had guided revenue growth of 1.5-2 per cent in 2023-24.