IT sector revenue growth to drop sharply in FY23

The information technology services sector will see a sharp fall in revenue growth to 12-13 percent in FY23 from 19 percent in FY22, the highest in the last eight years.

The decline is expected to tighten the IT expenditure by corporates amid the inflationary headwinds in the United States and European Union (EU), which together contribute almost 85 percent to the sector’s revenue.

There can be a slight fall in profit margins to 22-23 percent from 24 percent due to rising employee costs and travel expenses and the operating profitability will be healthy. Revenue growth from the banking, financial services and insurance segment, which constitutes nearly a third of the revenues for the sector, will remain healthy at 15-17 percent this fiscal versus 18 percent last fiscal.

Companies in the retail, manufacturing and telecom verticals are expected to tighten IT spending amid the highest inflation rates in the past two decades in the key US and EU market. Revenue growth from these verticals will moderate to 11-13 percent from 15-17 percent as a result of the same.