IT Services Q3 Earnings Preview - Beat, Raise Cycle Will Continue: Prabhudas Lilladher
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Prabhudas Lilladher Report
We expect strong sequential revenue growth in Q3 FY22 despite seasonally weak quarter (due to furloughs and lower working days). We estimate 3.4%- 4.7% QoQ constant currency (average: 4.1%) for tier-I and 4.4%-9.1% QoQ constant currency (average: 6%) for tier-II.
There is cross-currency headwind of 50-90 basis points due to appreciation of U.S. dollar against pound, euro and Australian dollar.
Growth is driven by high discretionary spends and digital transformation across all sectors and markets. We anticipate flattish or slight decline in margins on QoQ basis.
Margin headwinds of backfilling of attrition with lateral recruits at higher costs and decline in utilisation levels due to aggressive fresher hiring will be partially offset by pyramid optimisation, cost control measures and revenue growth leverage.
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