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India's IT Outsourcing Firms Eye Recovery Amid Global Spending Hesitancy
Earnings guidance from prominent Indian IT outsourcing companies, including Tata Consultancy Services Ltd. (TCS) and HCL Technologies Ltd. (HCL), is set to provide insight into the anticipated market recovery. As US and European enterprises remain cautious about new project expenditures, TCS and HCL have maintained a focus on outsourcing projects designed for cost efficiency. Consensus forecasts suggest that TCS, anticipated to report next week, will exhibit sequential revenue growth for the quarter from April to June. Accenture Plc, a notable peer listed in the US, has indicated that the surge in generative artificial intelligence is prompting businesses to reevaluate and upgrade their IT infrastructures, potentially leading to revenue gains for firms like TCS and HCL.
Japan Retail Giants Show Positive Growth Due to Seasonal Factors
In Japan, notable retailers such as Fast Retailing Co., the owner of Uniqlo, and Ryohin Keikaku Co., which owns the Muji brand, are expected to report significant double-digit growth in operating profits, thanks to increased sales of spring-summer clothing driven by warmer temperatures, according to Bloomberg Intelligence.
Key Earnings Highlights to Watch This Week
Monday
LG Energy Solution's second-quarter earnings may fall short due to decreased demand for electric vehicles in Europe and competitive pricing pressures from Chinese electric vehicle manufacturers. The company, a supplier of cylindrical batteries to Tesla, is hurrying to advance its battery technology to maintain its market position.
Thursday
Tata Consultancy Services is forecasted to show an 8.3% increase in quarterly profits as the Indian IT sector begins to recover. However, salary hikes might compress margins compared to the previous quarter, despite a slower pace in wage increases. Analysts also anticipate TCS to report a rise in employee headcount for the first time in a year, adding over 10,000 new employees compared to the previous quarter. Observers should note the commentary on financial sector clients, which significantly impact TCS’s revenue and have largely contributed to the recent slowdown.
Fast Retailing is predicted to post a 12% rise in third-quarter operating income, fueled by improved sales in East and Southeast Asia, provided there's an upswing in economic sentiment. The company’s focus on new technologies, such as barcode-free checkouts, is seen as a strategy to hit its substantial sales target of 10 trillion yen annually.
Conversely, Seven & i Holdings is likely to report a 7.7% decline in first-quarter operating profit due to sluggish domestic and overseas sales in March and April. Nevertheless, the overseas arm might achieve its 4% operating profit growth target for fiscal 2025, supported by enhanced gas volumes from new store openings and slight gross margin improvements.
Friday
HCL Technologies is expected to report robust revenue growth in its IT, business, and engineering and R&D services units for the first quarter. The company is anticipated to confirm its revenue growth guidance of 3%-5% at constant currencies for 2025. However, Jefferies notes that an immediate growth recovery seems improbable as discretionary IT spending remains subdued.
Ryohin Keikaku is projected to demonstrate a 15% increase in quarterly operating profit, driven by elevated temperatures boosting demand for spring-summer clothing. Despite challenges in the China market, Ryohin Keikaku is performing better than the general apparel sector and may incorporate more budget-friendly items in its offering to compete with local firms like Miniso and achieve its full-year earnings targets.
