Oracle reported earnings on Tuesday that mostly beat market expectations. The company reported total revenue of $17.19 billion for the third quarter of fiscal 2026, compared with an average analyst estimate of $16.91 billion, according to data compiled by the London Stock Exchange Group. The company also raised its revenue forecast for fiscal 2027 to $90 billion.
Oracle is increasingly positioning itself as a major cloud infrastructure competitor, challenging companies such as Amazon Web Services and Microsoft Azure. Amid this strategic shift, investors are closely analyzing the company’s earnings for signs of a broader AI and cloud computing economy. When Oracle meets or exceeds expectations, it often boosts confidence in the technology sector.
Positive sentiment driven by Oracle’s strong earnings pushed Wall Street higher in early trading hours before losing steam as investors cut hopes for an earlier end to the ongoing war between the United States, Israel and Iran. The tech-heavy Nasdaq Composite gained 0.01%, while the Dow Jones Industrial Average fell 0.07% and the S&P 500 fell 0.21%.
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Novama on IT Services
Novama has been bullish on IT stocks, suggesting the 20% correction seen since the start of the year has boosted valuations on expectations of AI disruption in the sector following the launch of an AI tool by Anthropic.
“Reports of my demise have been greatly exaggerated,” Nawama said, quoting a Mark Twain quote that perfectly describes the current state of the IT sector. “Given the advent and adoption of Gen AI, all the statements about the Indian IT services industry are being written. Concerns have been exacerbated by fast-paced services,” said Now with the reaction of SA IT companies and premier stock companies.
The Indian IT services industry is once again at a crossroads. The arrival of a new technology, General AI, threatens to disrupt the way it has operated so far, raising concerns about its near-term growth and long-term survival, Nawama said.
It does not see any existential threat from General AI and believes that the need for system integration, which can configure the enterprise plug and play software inputs and outputs according to its needs, will always be there.
“We also note that any B2B technology adoption is very different from the B2C segment. In the end, companies that are going to automate tasks still need someone to take ownership of the system and that will be IT services companies.”
Navama, however, cautioned that general AI adoption will follow a technology adoption curve, and IT services companies will face revenue erosion in the first phase, which they are currently facing, before reaching the tipping point.
“Following this, the opportunity will increase TAM development (according to Infosys management, USD 300 to USD 400 billion by 2030). However, companies are likely to move from headcount to a results-based revenue model. This will lead to lower headcount additions and less correlation with revenue growth in the coming years.
The IT services model is here to stay
Navama believes that the IT services model is here to stay and that the disruption of general AI will only lead to greater opportunities.
“After the recent sharp correction, we see the valuations of all stocks as very attractive,” it added.
“We see this as a déjà vu moment for the industry and believe it will emerge from this turmoil as before, with a net increase in its TAM. We remain positive on the sector from a medium to long-term perspective. Near-term volatility may continue,” Nwama said.
It now has a ‘buy’ call among all top ten IT services stocks.
It upgraded HCLTech, Wipro, Tech Mahindra and Hexaware Technologies to ‘buy’, and picks LTIMindtree, Continuous Systems, Mphasis, Infosys and Tata Consultancy Services.
(Disclaimer: The suggestions, recommendations, views and opinions given by the experts are their own. They do not represent the views of The Economic Times)
