Motilal Oswal expects margins to be range-bound and supply-side pressures to remain muted; however, meaningful margin gains are restricted by low growth, visa costs and pressure from a strong INR vs USD.
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Motilal Oswal Report
Q1 FY26 has been an uncertain, albeit better-than-expected quarter for IT services, in our view. While a host of geopolitical events as well as tariff uncertainty would have played spoilsport on notable deal signings, widespread client deferrals/ ramp-downs have largely been avoided.
We expect Q1 numbers to reflect this reality: QoQ revenue and deal total contract value across large-caps could be unexciting (expect QoQ constant currency growth range of -2.5% to +1.5% for large-caps.
Midcaps are expected to outperform once again with a growth range of -2.0% to +7.0%).
A weak dollar against a basket of currencies will lead to 100-200bp of QoQ cross-currency tailwinds, aiding estimates.
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