The earnings calendar is likely to start on a muted note with frontline IT firms feeling the pinch of furloughs but an improving demand environment will give some heft to the numbers for October-December, brokerages said.

The results season will commence this week with Tata Consultancy Services (TCS) announcing its scorecard on January 9. The country’s largest IT services firm will be followed by HCL Technologies on January 13 and Infosys on January 16.

The third quarter is a seasonally weak period for IT firms on account of holidays and furloughs, which reduce their billing hours.

India’s technology firms have been reporting tepid numbers for the past several quarters due to high inflation and elevated interest rates, which have affected discretionary spending by their clients.

The US Fed began its easing cycle by reducing interest rates on three occasions since September 2024. But the sentiment got dulled by the hawkish comments by US Fed chair Jerome Powell after the December meeting, which raised the prospects of limited cuts in 2025.

Brokerages feel the impact of the interest rate cuts and improving demand environment will be reflected on the performance of IT firms though it will bear the seasonal stamp.

An indication came from Accenture, which beat estimates when it posted $17.7 billion revenues for the first quarter of fiscal 2025 ended November 30. It also raised the annual revenue growth to 4-7 per cent from the earlier forecast of 3-6 per cent. Accenture follows a September to August fiscal year.

“We expect the usual seasonal factors to impact sequential revenue growth for our IT Services coverage. However, improvement in growth momentum on year-on-year basis is likely to continue in the third quarter, on the back of recovery in BFSI (banking financial services & insurance), lower project cancellations, beginning of interest rate cut cycle and end of uncertainties around US elections, albeit gradually,’’ a note from Emkay Research said.

The brokerage expects TCS to report a 14.4 per cent growth (over the previous year period) in net profits for the quarter at ₹12,695.5 crore. Its revenue is forecast to rise 4.8 per cent to $7,362 million.

On the other hand, Infosys could post a 9.2 per cent rise in net profits over the previous year period to ₹6,668.7 crore whereas its revenues in dollar terms could increase 4.4 per cent to $4,870 million.

Analysts expect Infosys to narrow its revenue growth guidance for the fiscal to 4-4.5 per cent in constant currency terms, while retaining the 20-22 per cent EBIT margin forecast.

In the second quarter, Infosys had raised its revenue guidance for the fiscal: the company projected growth to fare between 3.75 and 4.5 per cent, higher than its earlier guidance of 3-4 per cent in July.

Analysts at Centrum also said the broad demand environment continues to improve after getting bottomed out in the first quarter of this fiscal. The brokerage added that there are initial green shoots seen in verticals such as BFSI and technology, media & telecom (TMT).

It has forecast Infosys to bump up its revenue growth guidance for 2024-25 to 4-4.75 per cent.

A note from Motilal Oswal said the recovery in the IT sector is expanding beyond US BFSI (which continues to strengthen) into additional industry verticals such as hi-tech, which is recovering ahead of schedule.

The brokerage projected that Tier-2 companies will continue to outpace their frontline counterparts in growth during the quarter.