India's information technology companies are expected to report another subdued quarter despite the June period typically being seasonally favourable, with analysts pointing to weak discretionary spending, delayed client decision-making and continued macro uncertainty.
Brokerages broadly expect Tier-I IT companies to report muted sequential growth in the June quarter, with margins remaining broadly stable to lower as wage hikes, restructuring costs and artificial intelligence investments offset the benefit of currency movements. Management commentary on FY27 growth, client spending and AI strategy is expected to be the key driver of investor sentiment.
The June-quarter earnings season comes as the sector grapples with a fourth consecutive year of subdued growth expectations. While deal pipelines remain healthy and acquisitions continue to support growth for some companies, analysts say demand recovery remains uneven amid geopolitical uncertainty, slower discretionary spending and increasing AI-led productivity gains. Investors will closely monitor FY27 guidance, deal conversion, pricing trends and the pace of AI monetisation.
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Here's what analysts are expecting from IT sector Q1 results:
Citi
- Expects June-quarter constant currency organic revenue growth of -1.5% to +1% for the top five IT companies.
- Growth outlook, client decision-making, AI impact and margin trajectory remain key monitorables.
- Continues to see sluggish organic growth, rising merger and acquisition activity, and competitive pressure.
- Sees downside risk to FY27 consensus revenue expectations, particularly for TCS, HCLTech, LTIMindtree and Coforge.
Jefferies
- Aggregate revenue expected to remain broadly flat quarter-on-quarter in constant currency.
- Infosys and Tech Mahindra expected to outperform among large-cap IT companies, while Hexaware is seen leading mid-cap peers.
- Expects Infosys to raise FY27 revenue growth guidance following acquisitions, while HCLTech is likely to maintain its guidance.
- Margins expected to remain range-bound, supported partly by favourable foreign exchange movements.
- Focus remains on FY27 and FY28 growth outlook, discretionary spending and AI commentary.
CLSA
- Expects another weak quarter for global system integrators due to weak discretionary demand and slower large-deal ramp-ups.
- Says AI-led pricing pressure continues, though implementation opportunities could outweigh deflation over the next two to three years.
- Middle East tensions and slower deal execution expected to weigh on growth.
- Continues to prefer Persistent Systems and Coforge among mid-cap companies, and Tech Mahindra and HCLTech among large-cap peers.
UBS
- Expects another soft quarter as demand and pricing remain under pressure.
- Delayed client decisions and deal deferrals expected to weigh on growth following the Gulf conflict.
- Infosys expected to outperform among large-cap companies, followed by Tech Mahindra and TCS.
- HCLTech and Wipro expected to report sequential revenue declines.
- Margins expected to remain broadly stable to slightly lower as currency gains are offset by wage hikes, restructuring costs and AI investments.
Dolat Capital
- Expects Tier-I companies to report constant currency growth of -1% to +1.8% quarter-on-quarter, while Tier-II companies are seen in the range of -4% to +3.5%.
- Cross-currency movements expected to weigh on reported growth.
- Margin performance likely to remain mixed because of wage hikes, AI investments, go-to-market spending, operational efficiency and currency movements.
- Healthy deal wins and acquisitions continue to support medium-term growth, though guidance revisions remain a key risk.
IIFL Capital
- Expects sector revenue growth of 1.1% quarter-on-quarter in constant currency, with organic growth of 0.3%.
- Dollar revenue expected to be affected by cross-currency headwinds.
- Sector margins likely to contract despite rupee depreciation because of wage hikes and investments.
- Focus areas include demand recovery, AI adoption and monetisation.
- Says AI concerns continue to weigh on valuations, though any evidence of monetisation could improve sentiment.
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