1QFY27 Preview: Weakness in a Seasonally Strong Quarter

研报英文原文证据摘录

1QFY27 Preview: Weakness in a Seasonally Strong Quarter

UD appreciated ~2.5% against TCS (120)

USD, SEK and JPY depreciated ~1.5% against USD. In our coverage, we expect the cross Sagility(200) (156)(150) (100) (50) - 50 (bps)100

currency tailwinds/(headwinds) of up to 20bps. Due to the sharp INR depreciation, IT firms .Source: Company data, Jefferies estimates

may recognize large hedge losses in 1Q. We haven't factored this in our estimates.

Agg. margins impacted due to wage hikes in some firms: We expect agg. margins to decline

by 30bps QoQ to 19.8% impacted due to wage hikes in select companies partly offset by Fx

tailwinds. INR depreciation vs USD/Euro/GBP should support margins, with IT firms with higher

exposure to Europe being better placed. Among large caps, we expect TechM to report 50bps

QoQ margin improvement while we expect TCS to see a 120bps QoQ margin contraction due to

wage hikes. We expect margins to be range-bound for most mid-sized IT firms barring Coforge

which may see a 150bps decline due to acquisition (ex acquisition margins to be steady). We

expect Sagility to report 160bps margin contraction due to wage hikes given during the quarter.

FY27 revenue growth guidance and AI commentary in focus: While growth is likely to remain

muted in a seasonally strong quarter, any revision in FY27 revenue growth guidance will be

keenly watched out for. Our recent interactions suggest that pressures on IT services budgets

persist which is driving pressures on discretionary IT spending. We expect Infosys to include

inorganic contribution in its guidance resulting in 100bps increase to 2.5-4.5% YoYcc and HCLT

to maintain its FY27 services growth guidance of 1.5-4.5% YoYcc. We expect Wipro to guide

for -1% to +1% QoQcc (organic) for 2Q led by ramp-up of mega deals.