IT Q4 Results Preview: Revenue Growth To Remain Muted, All Eyes On Guidance

The Indian information technology sector is set to report its fourth quarter results, with Tata Consultancy Services Ltd. scheduled to kick off the earnings season on April 10. 

The IT companies' revenue growth in the last quarter is expected to remain modest, with all eyes on the guidance for financial year 2025-26. Delay in discretionary spending recovery, uncertainty due to tariff wars, and slower rate cut cycle of the US Federal Reserve are expected to weigh on the growth prospects.

The revenue growth of Tier-I IT firms is seen in the range of - (minus) 1% to +0.1%, as per Motilal Oswal Financial Services. It has an estimated range of 0.5% deceleration to 5% positive growth for Tier-2 firms.

Citi Research pegged fourth quarter services revenue growth in the range of -1.3% to +0.2% for the top five IT players of the country.

“We expect a sequential revenue decline for all large IT companies for the March 2025 quarter due to seasonal weakness, lower billing days and marginal deterioration in demand,” Kotak Institutional Equities said in its preview note. 

Margins in the fourth quarter are expected to remain flattish, due to headwinds. Kotak Institutional Equities notes, “Expect divergent EBIT margin performance due to timings of wage increases and seasonal weakness in certain business segments. On a YoY comparison, the EBIT margin will increase for all large companies, except for TCS. Expect steady to strong margin performance for mid-tier companies, deriving benefits from rupee depreciation and strong growth.” 

As the sector is weighed down by the unfavourable demand environment, brokerages expect for the bearish sentiment to have an effect on the IT companies’ outlook for fiscal 2026.

Revenue growth is anticipated at 6.4% YoY driven by BFSI vertical and consumer business. Despite no mega deals, the deal pipeline remains robust, with increased focus on application modernisation and data driven projects, according to Deven Choksey Research. 

Motilal Oswal expects TCS’ EBIT margins to remain flat sequentially.

What to watch out for:

• Demand outlook 

• Deal's total contract value and closure cycle 

• India revenue trajectory

Infosys is forecasted to clock sequential revenue decline of 2.3% due to lower revenues from sale of third-party items for service delivery, and seasonal weakness in demand, according to Kotak Institutional Equities. 

“We forecast 60 bps sequential decline in EBIT margin due to wage revision for junior employees, offset by rupee depreciation. We expect a large deal TCV of $3 billion, a decline on YoY comparison,” the brokerage noted. 

Citi Research expects revenue guidance to be in the range of 2-4% YoY in constant currency terms, and margin guidance to be in the range of 20% to 22% for fiscal 2026.

What to watch out for:

• Commentary on tech spending 

• Large deal win TCV 

• Outlook for FY26

Kotak Institutional Equities expects large deal TCV to be in the $1.6-1.8-billion range, taking into consideration Phoenix mega-deal. Revenue guidance is expected to be in the range of -0.5% to +1.5% for the June 2025 quarter. 

“We anticipate flat revenue growth QoQ driven by BFSI and healthcare vertical partially offset by weakness in technology and communications business. EBIT margins are likely to remain stable QoQ at 10 bps,” Deven Choksey Research notes

What to watch out for:

• Discretionary spending outlook 

• Commentary on realignment of service lines 

• Commentary on BFSI spending

Kotak Institutional Equities projects a revenue decline of 0.7% due to seasonal weakness in the products business and 0.9% growth in services business. 

The brokerage further forecasts EBIT margin of 18.2%, an increase of 60 basis points year-on-year and decline of 140 basis points quarter-on-quarter. The sequential decline will be likely due to lower license revenues from the products business, it said.

Citi Research expects IT services revenue guidance at 2.5-4.5% year-on-year in constant currency terms for fiscal 2026.

What to watch out for 

• New deal wins 

• Demand outlook 

• Hiring targets