IT and Telecommunications Sector Anticipates Increased Revenues in Q1

The German IT and telecommunications industry is forecasting a generally positive outlook for the first quarter of the year, with many executives expecting an increase in revenues. However, there is a notable concern regarding potential job reductions, particularly in the hardware sector.

According to a recent industry report from the Leibniz Centre for European Economic Research, nearly 38% of ITK executives predict a rise in revenues for Q1 2025. Conversely, 37% anticipate stable figures, while a quarter foresee a decrease in earnings. Hardware manufacturers are adopting a less optimistic stance compared to IT service providers, with about one-third of hardware executives expecting declining revenues. Approximately 35% predict their sales will remain unchanged, indicating a more cautious outlook within this segment.

When compared to the previous quarter's assessments, these projections reflect a more reserved sentiment. In Q4 2024, almost 44% of ITK company leaders reported rising revenues, with 29% indicating stability and 28% experiencing a downturn. The hardware production sector has shown particular signs of distress, with around 36% of firms reporting decreased sales and only 22% maintaining steady revenue levels.

In terms of employment, over a quarter of ITK executives are anticipating an increase in workforce requirements, while only about 10% expect to implement layoffs. More than 60% of respondents foresee stable staffing levels. However, the situation appears different for the hardware sector, where only 20% of leaders expect to expand their teams, and over a third predict job cuts.

This shift in employment expectations contrasts with the previous quarter, during which 31% of companies hired additional staff, while less than a quarter made reductions. Approximately 45% reported no changes in their workforce. Furthermore, only 18% of hardware manufacturers posted new job openings, with nearly 40% recognizing a decline in personnel needs.

Regarding product demand, around 37% of ITK executives expect an uptick in demand for their goods and services this quarter. Close to 42% forecast stable demand, while 22% predict a decline. Hardware manufacturers have a slightly different perspective, with almost 40% anticipating increased product demand, nearly a third expecting a downturn, and about 29% predicting no change.

These current expectations are less optimistic than those from the previous quarter, where over 40% recognized an increase in demand. Approximately one-third categorized demand as stable, while around 25% observed a decline. The hardware sector notably diverged from the broader ITK trends last quarter, with nearly 47% of hardware executives reporting a demand increase and over a third noting a decline.

The report is based on surveys conducted with approximately 1,200 executives from manufacturing and information science companies, encompassing the IT, telecommunications, media, and knowledge-intensive services sectors. A prior study by the Leibniz Centre highlighted a significant drop in new business formations within the ITK sector.