(Bloomberg) — Earnings guidance from Indian IT outsourcing companies including Tata Consultancy Services Ltd. and HCL Technologies Ltd. will reveal how the long-awaited recovery is unfolding.
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As North American and European companies continue to weary of spending on new projects, TCS and HCL have seized on outsourcing projects designed to offer cost savings. TCS results next week are expected to show that revenue growth increased sequentially in the April-June quarter, consensus estimates show.
Management at US-listed Accenture Plc has indicated that the boom in generative artificial intelligence is acting as a catalyst for companies to rethink and invest in their IT systems. This is expected to create revenue opportunities for companies like TCS and HCL.
In Japan, Fast Retailing Co., owner of Uniqlo, and Ryohin Keikaku Co., owner of the Muji brand, are expected to report double-digit operating profit growth for the quarter. Warmer temperatures boosted sales of spring-summer clothing, according to Bloomberg Intelligence.
Highlights to note:
Monday: Second-quarter earnings from LG Energy Solution (373220 KS) may disappoint amid lower demand for electric vehicles in Europe, HI Investment & Securities said. Demand from Tesla, a customer for its cylindrical battery, also fell short due to price competition from Chinese electric vehicle makers. The company is racing to commercialize battery technology that will fend off Chinese rivals.
Thursday: Tata Consultancy Services (TCS IN) quarterly profit is expected to grow 8.3% as earnings recovery begins to take shape in the Indian IT space. The salary hikes are expected to hurt margins compared to the previous quarter, although the pace of salary increases has slowed, analysts at Prabhudas Lilladher said. TCS likely added more than 10,000 employees over the previous quarter, the first sequential headcount growth in a year. Keep an eye out for comments from financial sector customers, who represent almost a third of revenues and have been a big part of the recent slowdown.
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Fast Retailing’s third-quarter operating profit (9,983 JP) likely rose 12%, estimates show. Sales in East and Southeast Asia are expected to strengthen if economic sentiment improves, SMBC Nikko said. Its operating margin in China will be scrutinized amid slowing consumer sentiment, the brokerage added. The retailer is also investing in new technologies, including boxes without barcodes, to reach the target of 10 billion yen ($62 billion) in annual sales.
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Seven&i’s Q1 operating profit (3,382 JP) likely fell 7.7%, consensus shows. Domestic and foreign sales were slow in March and April. The overseas business can achieve its 2025 operating profit growth target of 4%, helped by improving gas volumes from 204 new stores and slight growth in gross margin, SMBC Nikko said.
Friday: HCL Technologies’ (HCLT IN) Q1 earnings should be supported by robust revenue growth in IT and business and engineering services and R&D units, consensus shows. It is expected to repeat 2025 revenue growth guidance of 3% to 5% in constant currencies, according to Nomura. Jefferies said a near-term growth rebound is unlikely as discretionary IT spending remains weak.
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Ryohin Keikaku (7453 JP) is expected to post quarterly operating profit growth of 15% as warmer temperatures boosted sales of its spring-summer clothing. The China business has struggled but is still outperforming the overall apparel market in China, Jefferies analysts said in a June 10 note. Muji’s owner may add more affordable items to its lineup to fend off local rivals like Miniso and meet full-year profit targets, BI said.
–With help from Shinhye Kang.
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