Morgan Stanley IT services Q4 outlook: Growth or not? Just check what it revealed - Hindustan Times

Morgan Stanley IT services Q4 outlook: Growth or not? Just check what it revealed

Apr 12, 2024 04:56 PM IST

Morgan Stanley IT services Q4 outlook: US market is playing a big role, as usual. Know what is expected.

The IT services sector has been one of the most spotlighted in India over the last few decades and now, in the age of artificial intelligence, it is even more under the scanner about how it is coping with the massive global changes roiling the world. Currently, the quarterly performances are under review. So, how is the IT services sector expected to fare in Q4? The sector has been quite dependent on the US market and analysts have always looked to see which way the market is leaning to reveal their outlook. The same is happening now and there is one big matter to focus on - US banking, financial and insurance segment (BFSI). It has led brokerage Morgan Stanley to put a 'moderate' outlook on the Indian IT sector in Q4 and it has much to do with the hiccups that the BFSI sector there has been suffering from.

Morgan Stanley IT services Q4 outlook: How will the IT sector pan out? Check it out here.(REUTERS)
Morgan Stanley IT services Q4 outlook: How will the IT sector pan out? Check it out here.(REUTERS)

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As a proviso, Morgan Stanley added that cloud services demand is on the up, but Indian IT services sector has not yet benefitted from it, MoneyControl reported.

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And as far as the AI race is concerned, the business opportunities provided by these companies depend a lot on, in many cases, taking funds from other segments of theirs and allocating the same elsewhere. Clearly, a fraught exercise and exactly how this reprioritisation will happen is uncertain, making this opportunity unavailable for immediate purposes to some extent. It has also been indicated that tight IT budgets and discretionary spending in the US will likely impact IT sector growth.

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Notably, Accenture had indicated that it was revising its own revenue guidance downward and the reason it quoted for taking this big step was “economic uncertainty” and that this very fact was causing many of its clients to reduce their consulting services spend. To the sluggish demand has been added the burden of high interest rates hindering the industry's rapid growth.

These dark clouds over consultancies is leading many to talk about pressing the pause button on new hiring and even thinking about job cuts

What is the consensus?

Having said all that, the consensus on the IT sector is leaning towards the Indian tech companies may well witnessing sequential improvement in Q4 earnings.

Margins may well see an uptick, but that would mostly be coming off the efforts to cut costs by these companies.

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