Infosys To LTIMindtree: Goldman Sachs Sees Bleak Indian IT Growth

Goldman Sachs downgraded LTIMindtree to 'neutral, while it cut target prices for Tata Consultancy Services Ltd., Wipro Ltd., Tech Mahindra Ltd., Infosys Ltd., and HCLTech Ltd. The brokerage has also lowered estimates and multiples for Indian IT services companies to factor in the macroeconomic headwinds, stemming mostly from the US.

The brokerage lowered the revenue growth forecast for financial year 2026 to 4% year-on-year growth, which implied a 230-basis-point cut from the previous estimate. The FY26 revenue growth forecast is only 50 bps higher than the 3.5% year-on-year estimate for the current financial year.

Bleak economic growth outlook in the US is expected to weigh on Indian IT companies because the world's largest economy accounts for 60% of the revenues. Analysts have downgraded the US GDP growth forecast to 1.7% from 2.4% and raised the probability of a recession in the US to 20% from 15%. The impact of tariff policies has called for such a downgrade for US economic growth, Goldman Sachs said.

Aggregated data from the global companies, which has a high correlation with Indian IT companies, suggested a sharp reduction for US companies since the start of the calendar year 2025, the brokerage said. Revival of discretionary spending will also likely be delayed as macro uncertainties in the US cause delays in decision-making, as per Goldman Sachs' analysis of past cycles.

LTIMindtree has the highest exposure to the US; hence, Goldman Sachs reduced its estimates and target price significantly. The brokerages' estimates for Indian IT companies are below consensus estimates after the revision.

Goldman Sachs projects flat quarter-on-quarter revenue growth for the January–March period for the Indian IT sector. On an annualised basis, revenue growth will likely be 4%, and it will likely deteriorate to 3.1% in the first quarter of financial year 2026. There is also expected to be residual headwinds from generative artificial intelligence productivity pass-through and the impact from recent macro headwinds. Goldman Sachs is expecting a 30–70 basis points impact on dollar revenues for the 40 Indian IT companies it covers.