From Investing.com: 2024-05-05 10:26:03

IT services companies are facing revenue challenges due to unpredictable spending constraints and customer churn, deferring growth expectations to FY25. Leaky buckets in portfolios hinder growth, with large-cap firms affected by macro uncertainties. Discretionary spending remains low, impacting short-term growth opportunities.

Despite an uptick in Total Contract Value wins, the gap between TCV growth and YoY CC growth persists, worsened by client attrition and sluggish contract uptake. Bernstein’s churn model predicts growth recovery for TCS and Infosys by FY25 and beyond. TCS is seen as a defensive play, while Infosys offers cycle recovery potential.

Revenue guidance for FY25 falls below expectations for Infosys and HCL Tech, with Accenture revising downwards due to weakened discretionary spending trends. Cognizant and Capgemini also offer conservative growth forecasts. The IT services recovery cycle is characterized by an elongated slowdown and slower rebound amid industry challenges.

The leaky bucket problem persists in FY24, driven by macro uncertainties and client churn in key verticals like BFSI and Hitech, delaying transformation programs. Infosys focuses on vendor consolidation and AI efficiency to combat challenges. The sector remains resilient long-term, fueled by technological advancements.

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Read more at Investing.com: Navigating Growth Challenges in the IT Services Landscape By Investing.com