Q2 results: Infosys, Wipro, and HCL Technologies brace for challenging earnings amid high expectations

Q2 results: Top Indian tech stocks such as Infosys, Wipro and HCL Technologies are faced with high expectations from investors as they worry over a potential market correction, a Bloomberg report said.

The Indian IT sector has seen recovery in FY25 after initial slowdown due to decreased spending from US clients in the previous year, and the first quarter earnings (Q1FY25 results) were better than Q4FY24, Bloomberg noted that “elevated full-year expectations might prove hard to beat”.

Analysts at HSBC Global Research said that while demand is improving, “it it is not beating existing estimates” and recovery seen in banks, media and telecom stocks will “not be enough to beat consensus”. Most will be looking for hints of budget from US companies and impact of the rate cuts, the report added.

Worries Over Market Correction

There are also worries over market correction in Indian stocks and consideration of whether earnings across sectors can justify expensive valuations after the Nifty 50’s bull run in the past year, the report added. Notably, Tata Consultancy Services (TCS) announced Q2FY25 results on October 10 and missed profit expectations.

Across Asia too, the Taiwan Semiconductor Manufacturing Co. (TSMC) which saw better-than-expected 39 per cent rise in quarterly revenue, and Contemporary Amperex Technology Co. (CAT) which is expected to post accelerating growth are also likely facing challenges.

Key Highlights to Watch

• Avenue Supermarts (DMart) likely saw double-digit profit growth in the second quarter, although slower store additions may affect future earnings. The company already reported a 14 per cent rise in revenue from operations in the period, lower than Citi’s estimate of 19 per cent. Citi added it’s cautious about earnings as an adverse product mix may have hurt the gross margin. The Q2FY25 results are expected on October 12.
• HCL Technologies should maintain full-year services revenue growth guidance of 3-5 per cent, as per Nuvama Institutional Equities. HCL’s near-term expansion may be held back by cautious discretionary IT spending by telecommunications, media and technology clients, Bloomberg Intelligence said. Results are expected on October 14.

• Reliance Industries’ earnings were likely helped by Jio’s price hikes, which made the digital services segment’s revenue the fastest-growing among all its verticals. Still, the mainstay petrochemicals businesses, which brings in the biggest revenue share, likely saw profit dip. Refining margins also probably more than halved, analysts at Emkay Research wrote.
• Infosys is widely expected to raise its full-year revenue guidance closer to market consensus, while Wipro’s report is expected to be less eventful. Commentary on opportunities for projects related to generative artificial intelligence will be closely watched. Consensus estimates predict margins should expand for both companies, which analysts at Emkay Research attribute to absence of visa costs and expense-optimization measures across the sector. Both are expected to release Q2FY25 earnings report on October 17.
• Nestle India will probably report single-digit quarterly sales growth, consensus estimates show. The firm likely implemented price hikes in response to rising commodity prices, analysts at Motilal Oswal said. The Q2FY25 earnings report is likely on October 17.