IT Q2 Results Preview — Tech Mahindra, Coforge Remains Motilal Oswal's Top Pick Ahead Of Q2 Earnings

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Motilal Oswal Report

We expect Q2 FY26 to be a muted quarter for IT services, with no material improvement over the past quarter.

As clients reel under macro and tariff uncertainty, we believe there is hesitation to commit additional dollars to any large initiatives. We expect Q2 numbers to reflect this, with QoQ cc growth expected in the range of 0.3% to 2.4% for large-caps and mid-caps expected to outperform once again with a growth range of -0.5% to 6.0%.

For Q2, we expect aggregate revenue for our coverage universe to grow by 6.0% YoY, while Ebit and PAT are likely to grow by 5.2% and 5.5% YoY (all in INR terms), respectively.

We prefer Tech Mahindra Ltd., as we see early signs of transformation under the new leadership and improving execution in BFSI. We believe Tech Mahindra's transformation remains relatively decoupled from discretionary spending. We continue to like HCLTech for its all-weather portfolio.

In mid-caps, Coforge and Hexaware remain our top picks.

The previous downcycle showed that mid-tier firms can thrive in cost-focused environments. Coforge’s Sabre deal shows mid-tier companies now have both scale and solution maturity to win cost-saving deals. Hexaware, meanwhile, is gaining share through consolidation deals in Financial vertical.

As pressures in large accounts appear to be tapering, an improving margin trajectory bodes well for the company.

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