IT Sector Q3 Preview: Seasonal Weakness Eases As Deal Momentum Builds

India's information technology companies are expected to report a modest but resilient third-quarter performance, with analysts pointing to easing deal delays and steady deal wins offsetting the usual seasonal slowdown.

The December quarter is typically the weakest for IT services firms due to fewer billing days, but analysts say growth momentum this year looks stronger than in previous cycles. Deal ramp-ups, improved conversion of pipelines, and fewer project deferrals are expected to support sequential growth, even as discretionary spending remains under pressure and geopolitical risks continue to weigh on sentiment.

While demand recovery remains uneven across geographies and verticals, brokerages expect management commentary to turn more constructive during the December quarter. Focus areas are likely to include deal pipelines, artificial intelligence-led engagements, and budget visibility for calendar year 2026. Margins may see support from foreign exchange movements, partly offset by furloughs in the quarter.

Here's what analysts are expecting from the IT sector during Q3 results announcements:

Nuvama

• December quarter expected to remain stable despite seasonal headwinds.

• Most companies likely to post muted but positive sequential growth, supported by deal ramp-ups.

• Tier-2 companies expected to continue outperforming, with Hexaware Technologies and Zensar Technologies as exceptions reporting sequential declines.

• Commentary likely to remain similar to the previous quarter given limited macro change.

• Maintains a positive medium- to long-term view on the sector.

Jefferies

• Aggregate revenues for its coverage expected to moderate to 0.8% year-on-year in constant currency terms in Q3.

• HCLTech and LTIMindtree expected to grow faster among large firms, while Coforge and Sagility may outperform among mid-sized peers.

• Growth impacted by December-quarter seasonality.

• Margins may see support from foreign exchange, partly offset by furloughs.

• Focus remains on calendar year 2026 budgets and demand outlook.

UBS

• December quarter likely to remain modest for IT services companies.

• Commentary from Accenture does not yet indicate a recovery in discretionary spending.

• Sector outlook remains cautious, though early signs of improvement are emerging.

• Prefers Infosys and HCLTech among large caps, and Persistent Systems and Mphasis among mid-tier firms.

Investec

• December quarter is seasonally soft, but deal delays and deferrals have eased.

• Stronger deal wins expected to support growth momentum compared with prior years.

• Relatively better growth expected at HCLTech, Wipro, Persistent Systems, and LTIMindtree.

• Tech Mahindra, KPIT Technologies, and Zensar Technologies may begin to see positive catalysts.

• Tier-1 companies expected to deliver sequential revenue growth of 0.8%–2.4%.

• Bottom end of guidance may be raised for Infosys and HCLTech.

• Deal pipelines remain robust, with increasing traction in artificial intelligence-led deals.