India's biggest IT services companies are heading into the September quarter with growth still under pressure as cautious corporate spending, delayed deal approvals and slow conversion of new orders weigh in on revenue.
UnearthInsight expects the country's five largest IT firms to post sequential revenue growth of just 0.5% to 1% in the July-September quarter, broadly in line with the previous quarter and highlighting the sector's slow recovery.
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“Q2 is not going to be any better than Q1... because we are not seeing any revival in client budgets or spending,” UnearthInsight Founder and CEO Gaurav Vasu said.
He said geopolitical tensions were prompting clients to remain cautious on non-essential technology spending, while lengthy approval processes were pushing back the timeline for signing and executing new contracts.
Gartner expects the quarter to be “somewhat stronger” than the previous one, mainly as previously awarded contracts move into revenue-generating phases.
However, it said growth among leading IT services companies is likely to remain modest as clients continue to prioritise productivity, cost optimisation and measurable returns.
The earnings season begins with Tata Consultancy Services (TCS) on October 8, followed by HCLTech on October 12 and Infosys on October 23.
UnearthInsight expects deal bookings to remain healthy, but said converting those wins into revenue could take longer. Vasu expects lengthy decision cycles to persist for the next 12-18 months.
He does not expect significant changes to FY27 guidance, although some companies could raise the upper end of their forecasts by around 0.5 percentage point.
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The research firm has retained its FY27 growth estimate of 3-4% for the largest IT companies, with a significant portion expected to come from acquisitions rather than an underlying recovery in demand.
The industry has already spent about $3.6 billion across 14 M&A deals in FY27, Vasu said.
Margins are likely to remain under pressure as companies absorb wage hikes, invest in AI platforms and partnerships, and pass some productivity gains back to clients through lower pricing.
Gartner expects margins to remain broadly stable, with automation and better utilisation offsetting AI-related investments, wage inflation and pricing concessions.
At the same time, AI is beginning to reshape the traditional services model. Vasu said AI-led revenue still accounts for less than 5% of industry revenue, while an increasing share of client spending is moving towards native AI platforms and startups.
Gartner said generative and agentic AI are beginning to materially reduce demand for labour-intensive services, particularly managed services and service-desk work.
By 2030, it estimates that as much as 50% of traditional managed-services opportunities could become difficult for incumbent providers to win.
Infosys said AI-related revenue accounted for 8.2% of its total revenue in the June quarter, while TCS reported annualised AI revenue of $2.6 billion.
UnearthInsight expects mid-tier IT companies to continue outperforming larger peers, although their growth is also likely to moderate. It expects the sector to recover more meaningfully in FY28, with growth of around 6%.
(With inputs from PTI)
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