For the first time, three major Indian IT services businesses will release their quarterly earnings on the same day: Tata Consultancy Services Ltd (TCS), Infosys Ltd, and Wipro Ltd.

Investors will be paying close attention to management commentary on outlook, attrition rates, and deal activity as the major three report their third-quarter earnings on Wednesday.

Despite the fact that Q3 is a traditionally slow quarter due to furloughs and fewer working days in key U.S. and European industries, economists predict corporations to post excellent profitability due to strong demand.

Mint presents five key takeaways from TCS, Infosys, and Wipro’s third-quarter earnings, which will be released after market hours on January 12th.

Guidance:

Infosys’ revenue growth target for FY22 is expected to be revised from 16.5-17.5 percent to 17.5-18.0 percent in constant currency, according to Emkay Global. Wipro is projected to guide for a 2-4 percent sequential rise in constant currency for Q4 FY22, while HCL Technologies is expected to maintain its double-digit revenue growth projection for FY22. TCS does not provide any explicit revenue growth projections.

Growth in revenues:

In constant currency, analysts estimate TCS to report a 3.5 percent increase in revenue. “As the market leader, TCS will benefit greatly from core transformation, cloud adoption, and digital adoption.” Furthermore, continued market share losses by important rivals such as Capgemini and Cognizant would directly benefit TCS, according to Edelweiss Securities in a pre-earnings note. In constant currency, Infosys and Wipro are forecast to boost sales by 3% and 3.3 percent, respectively.

Margins on EBIT:

With most IT services firms reporting improved margins, the EBIT margin trend should start to improve. Due to supply-side problems cooling off, pricing increases, and operating leverage, Edelweiss Securities expects Infosys to deliver a 60-basis-point margin improvement sequentially. “As supply-side pressure eases, we estimate Wipro to report a q-o-q margin increase of roughly 20 basis points,” the brokerage firm stated.

Large-scale deals are picking up steam:

Investors will be watching to see how well the biggest IT firms can build up large acquisitions in the coming quarters. Edelweiss Securities wants to hear from Infosys on deal momentum in the hi-tech sector. In Q3, analysts forecast solid deal intake across the board.

“However, TCV (total contract value) of deal intake may stay stable in Q3 due to customers’ urgency to complete digital transformation initiatives in a short period of time rather than signing significant, longer-term transactions that need lengthy due diligence and legal processes. The transaction pipeline is strong across the industry, owing to an increase in projects including cloud adoption, digital transformation, and customer experience transformation, according to Emkay Research.

Management’s opinion on the future:

The company’s comments on the demand climate in the next quarters will be keenly examined. The essential elements to keep an eye on, according to analysts, are the FY22 prognosis, deal intake, and attrition rates.

Management commentary on the IT budget for this calendar year, efforts are taken to handle supply-side difficulties and levers to maintain margins, demand environment in key verticals, pricing environment, and deal pipeline and closure momentum will all be watched by investors.

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