Nifty IT down over 3%: Why have IT stocks slipped in trade today?

Information technology (IT) stocks traded in the negative territory on Thursday, with its sectoral index Nifty IT down nearly 3.5 per cent. The weakness in IT stocks came after Microsoft and Meta Platforms reported their earnings for the September quarter. 

 

Even though Microsoft reported healthy Q3 numbers, it signalled that big artificial intelligence (AI) investments were not enough to keep pace with capacity constraints at its data centers.

 

Brett Iversen, Microsoft's vice president of investor relations, reiterated that Microsoft will not be able to address AI capacity constraints until the second half of its fiscal year, as per Reuters. 

 

Microsoft's revenue increased 16 per cent year-on-year (Y-o-Y) to $65.59 billion as compared to $64.51 billion in the third quarter and net income rose 11 per cent to $24.67 billion from $22.29 billion in the year-ago quarter. 

 

Meanwhile, Meta Platforms warned of a significant acceleration in its infrastructure expenses in 2025 in its third-quarter earnings report on Wednesday. 

 

Closer home, around 10:12 AM, Persistent Systems shares were down over 4 per cent, Mphasis was down over 3 per cent, Tech Mahindra, L&T Tech, TCS, Coforge, HCLTech, and Infosys were down over 2 per cent each. 

 

Similarly, Wipro and LTIMindtree were down over 1 per cent each. In comparison, the Nifty IT index was down 3.48 per cent at 40,220.15 and Nifty50 was down 0.37 per cent at 24,250.9. 

 

Domestically, amid the ongoing second quarter corporate earnings season, HCLTech has raised the lower end of its FY25 revenue growth guidance by 50 basis points (bps), bolstered by increased client spending. The Noida-headquartered company is now estimating revenue growth between 3.5 per cent and 5 per cent.

 

Infosys has also revised its revenue guidance higher for FY25 to 3.75-4.5 per cent, from 3-4 per cent, earlier.

 

"HCL upped only the lower end of its guidance while infosys’ guidance revision underwhelmed. Current guidances imply a 2Q Compound Quarterly Growth Rate (CQGR) of -2 per cent to +2 per cent," brokerage firm JM Financial said. 

 

TCS’ chief executive officer and managing director, K Krithivasan, noted that the cautious sentiment observed in previous quarters continued to weigh on demand. “All the growth markets continue to grow,” he said, “however, the demand environment continues to be cautious.”

 

Meanwhile, Wipro expects revenue from the IT services business segment to be in the range of $2.6 billion to $2.7 billion. This translates to sequential guidance of (-) 2.0 per cent to 0.0 per cent in constant currency (CC) terms. 

 

JM Financial, in its report, said, "In-line operating performance (growth/margin), moderate deal wins and weak second half outlook characterised 2QFY25 for the IT Services sector."

 

It added: Last year’s record deal wins have supported H1FY25 growth. Stable leakages have helped too, though sporadic instances of ramp-downs (e.g TCS/WPRO) still linger.