IT stocks fall as Epam lowers guidance

IT stocks fall as Epam lowers guidance

Information technology stocks lost value on Tuesday after Epam Systems once again cut its revenue guidance for CY2023. The NSE IT Index fell 1.88% while shares of Infosys gave up 1.8%. Shares of TCS yielded 1.6%.

Lowering its revenue growth outlook, EPAM now expects a decline of 2% in constant currency revenues, at the mid-point of the guided band. With this, the company has now cut its CY2023E revenue growth expectation by around 13% over two consecutive updates.The company has attributed the slowdown to continuing client caution on ‘build’ spends, slower-than-assumed rate of pipeline conversion and some reduction in total pipeline, analysts at Kotak Institutional Equities (KIE) wrote in a report.

The KIE analysts added the slowdown in discretionary spending will have implications on Indian IT, with 1QFY24 likely to be weak. “We believe the recent run-up in the sector has been ahead of fundamentals, they observed.

Delays in client decision-making and pullbacks in discretionary spending have implications for the growth of Indian IT, they added. “We expect revenues in Q1FY24 to be weaker than in Q4FY23 across companies in our coverage universe,” they wrote. They believe the demand environment is especially weak in the financial services and technology segments.