Q3 preview: IT firms likely to post muted numbers; some mid-caps may shine

Information technology (IT) companies’ financial performance may have been muted in the October-December quarter (Q3) of the 2019-20 financial year, thanks to a seasonal weakness due to furloughs and fewer work days, besides continued challenges in the banking, financial services and insurance (BFSI) and retail verticals. Additionally, a waning impact of tax reforms in the US, and policy uncertainty ahead of Presidential elections there, might also have subdued the performance of Indian IT services companies.

The October-December period is usually a soft quarter for IT firms, since it has fewer work days due to the holiday season that falls in it. According to analysts, some IT vendors have cited a higher impact of furloughs in Q3 of FY20 than in the same quarter of last year. This might mean tepid revenue growth in Q3 this year.