Shares of Indian IT companies are in the spotlight today after the Nasdaq-listed IT services major Cognizant Technology Solutions, reported its Q4 results that exceeded Wall Street expectations. The Nifty IT Index as well as individual tech counters like Infosys, Wipro, Tech Mahindra and HCL Tech are all in the green even as the markets remain in the red within a right range.
This positive performance from the US-based IT giant Cognizant has sparked interest in the broader IT sector, particularly in Indian IT stocks. Cognizant posted a 6.7% YoY revenue growth for Q4 at $5.2 billion, surpassing analysts forecast of $5.06 billion. The company also raised its quarterly cash dividend by 3%, increasing it to 31 cents per share.
Nuvama says Cognizant Guidance encouraging
Cognizant has guided for a better CY25 than CY24 – both overall and organic. The management gave Q1CY25 revenue guidance of -0.5% to +1% QoQ and guided for +6.5% to +8% growth annually or YoY. For CY25, It also guided for revenue growth of +3.5% to +6% YoY, which includes 250 bps of inorganic contribution.
According to Nuvama, “This translates to organic growth guidance of +1% to +3.5% CC YoY compared to -0.1% CC YoY organic growth in CY24. CTSH anticipates adjusted operating margin of 15.5–15.7%, with a sequential decline in Q1 due to seasonality. Management also highlighted the completion of the NextGen program, with the company incurring USD49mn in restructuring cost in Q4 ($33 million in Q3).”
Kotak Institutional Equities on Indian IT services
Kotak Institutional Equities has maintained a Neutral outlook on the IT services sector, pointing out potential challenges ahead. According to the brokerage, “the industry is likely to face short-term headwinds from the growing adoption of generative AI, which may impact growth by 2-3% starting in CY2025.”
In its report, the brokerage pointed out that competition in the AI infrastructure layer is intensifying, with new language models from DeepSeek showing positive trends. “We believe DeepSeek’s new models are part of a broader trend,” they noted in the report.
The brokerage firm in the report noted some key observations which includes “increased competition in the AI infrastructure space, then significant cost reductions in training and inference, and open-source models keeping pace with closed-source alternatives. DeepSeek’s frontier model, for instance, is priced lower than competitors, which could further drive down costs, added the brokerage firm.”
As per the brokerage, mid-tier firms, which are more exposed to application development than tier-1 companies, may face a greater revenue impact. However, quality mid-tier firms are viewed as “challenger vendors” by clients, which could help them remain competitive in the long run.
IT stocks performance today
During today’s intraday trading session, Infosys is trading at Rs 1,908.80, reflecting a gain of 0.62%. Wipro’s share price has risen by 0.60%, reaching Rs 317.70. Similarly, Coforge share price is up by 1.09%, trading at Rs 8,595.
On the other hand, TCS is experiencing a slight decline, with its share price at Rs 4,075, down by 0.39%.