India’s US-dependent IT sector is bearing the brunt of the Donald Trump era, and the signs are now evident. According to GTRI, the United States accounts for 70 per cent of IT export revenue. Hence, any disruption in policy or an economic downturn causes a direct impact on client spending, project timelines, and total contract value (TCV).
The US IT sector is bearing the brunt of a consumption slowdown, high credit rates and erratic policy decisions, coupled with the emergence of artificial intelligence as one solution for cutting costs without impacting operational effectiveness.
In recent months, after Trump returned to power in January 2025, its IT sector saw a slowdown in large deal activity and some cuts in enterprise tech budgets, partly attributed to economic headwinds. Tax driven uncertainty led to cost increases, and anticipation of tighter regulations, especially for those taking business out of the country or hiring non-American workers.
North America revenue and TCV take a hit
Tata Consultancy Services which has recently announced to lay off about 2 per cent of its workforce—roughly 12,260 employees — has attributed the move to weak business sentiment and delayed client decision-making.
Uncertainty around the Trump tariffs has made large US clients cautious. The company highlighted that many have either delayed major IT projects or are opting to extend existing contracts instead of signing new ones. This has directly affected the growth momentum of India’s top software exporters.
In the April–June quarter (Q1FY26), Tata Consultancy Services (TCS) reported that 49.5 per cent of its total revenue came from the region. However, its TCV from North America declined sharply to $4.4 billion from $6.8 billion in the previous quarter.
Project delays and slower deal ramp-ups
TCS CEO K. Krithivasan admitted in the company’s earnings call that client hesitation intensified during the quarter. “There are some places where we find the projects are started but at a slower pace,” he said. “And there are some places where the projects are paused for a duration.”
He also referred to a major client who chose to extend the contract duration rather than increase immediate spending, citing the need to manage expenses amid tariff concerns, as per a report by Nikkei Asia.
Large deals become rare and contested
As per a report by Nikkei Asia,Large deals—contracts typically worth more than $50 million annually—are key to ensuring predictable revenues for IT companies. TCS had 131 such clients in Q1FY26, down from 140 in the same quarter last year.
“$50 million deals bring clarity and certainty about revenues,” said Yugal Joshi, Partner at technology research firm Everest Group, to Nikkei Asia. “If a service provider spends a long time with a client and they like the work, they will get more work. The scope of upselling increases.”
TCV declines for peers Infosys, HCLTech
The cautious sentiment has also affected TCS’s peers. Infosys, India’s second-largest IT firm, recorded large deal wins of $3.8 billion in Q1FY26. HCLTech, however, saw a steep 39.5 per cent decline in its TCV, which stood at $1,812 million in the June quarter.
“If you look at the current demand environment, I would say that each of these (large) deals is extremely strongly contested,” said Srini Palia, CEO of Wipro, during an analyst call. “There will be price pressures.”
Clients demand discounts, adding to pricing pressure
With budgets tightening, clients are now pushing for discounts during contract renewals. This has put further pressure on margins and revenue growth.
“Definitely customers have expectations and (there are) competitive pressures,” said C. Vijayakumar, CEO of HCLTech, according to Nikkei Asia.
Joshi from Everest Group believes pricing pressure will continue. “The value proposition that service providers have taken to the clients is that they can do the work at a lesser cost — and that’s what the clients expect them to do,” he explained. “Even if service providers are adding scope (of work), clients are asking for reduction. The reason being, there are other providers willing to meet those expectations.”
While the US has signed trade agreements with countries like Japan, Vietnam, Indonesia, and the UK, talks with India are still ongoing. Until a deal is reached, Indian IT firms may have to continue operating in a cautious, low-growth environment.
More layoffs likely in IT sector, warns Nasscom
According to media reports IT industry body Nasscom, said that more layoffs are expected across the IT services industry in the near term.
In a statement titled “Workforce realignment and industry transformation”, Nasscom said, “Over the next several months, we anticipate some transitions as organisations pivot toward product-aligned delivery models, driven by rising client expectations around agility, innovation, and speed,” the statement said.
Nasscom warned that this shift could lead to workforce rationalisation in the short term, as traditional skillsets are re-evaluated.