IT Q3 preview: Seasonally slow quarter; CY19 outlook to be watched

The top five IT firms are likely to post 0.7%-2.1% QoQ USD revenue growth (1.3%-2.6% QoQ in constant currency (CC terms) with Tech Mahindra (TechM) likely to lead the pack

We expect the IT firms under our coverage to post a combined 1.4 per cent quarter-on-quarter (QoQ) rise in revenue in US dollar terms in Q3FY19 - a seasonally weak quarter, owing to furloughs and lower billing days led by the holiday season. Reported USD revenue is likely to be adversely affected on US dollar strength against cross-currencies including Euro, British pound and Australian dollar (1.3-2 per cent QoQ appreciation on quarterly average rate).

We expect 50-70 basis points (bps) adverse impact of cross-currency movement for top-tier IT firms, while for mid-tier IT firms, impact is seen at 25-45bps (with