India’s IT sector is in focus as the Q2 earnings season kicks off. Major companies like TCS, HCLTech, and Infosys are scheduled to announce their second-quarter results on October 9, 13, and 16, respectively. The street will watch out for management commentary on hike in H-1B visa fees along with ongoing tariff tension.
Nuvama noted, “The macro environment remains uncertain, especially after the H1B visa fee event.”
IT sector set for stable Q2: Nuvama
Nuvama expects the IT sector to clock stable performance in the September quarter (Q2FY26) after a weak start to the year. “Q2FY26E is likely to show signs of stability after Q1FY26 was impacted by tariff-related uncertainty,” it added.
The brokerage further noted that, for now, US regulations have not had a major impact, but companies are mainly winning cost-saving projects, while large discretionary tech spends remain absent. “We continue to expect a recovery in tech spends in the medium term as enterprises restart investments in modernising legacy IT systems. In the near term, volatility might persist given the rapidly changing macro environment,” Nuvama said.
Nuvama sees sequential growth across IT sector
“Almost all companies are expected to grow sequentially this quarter,” Nuvama said, adding that deal wins continue to look steady despite demand volatility.
According to Nuvama Institutional Equities, large-cap firms like TCS, Infosys, Wipro, HCL Tech, and Tech Mahindra may deliver modest growth, while mid-tier players such as Coforge, Persistent, LTIMindtree, Hexaware, and Mphasis are set to outperform.
TCS likely to post flat revenue growth in Q2
TCS is expected to deliver flat growth in the quarter. Revenues are likely to rise 0.2% quarter-on-quarter to $7.43 billion, while profit after tax is seen growing 2.3% sequentially to Rs 1,30,582 crore.
Margins are expected to expand by 20 basis points to 24.7%. Nuvama said the India business will remain flat, with the BSNL deal ramp-down completed in Q1. The brokerage will also watch TCS’ commentary on the US macro outlook and updates on employee restructuring.
Tier-1 IT firms to post modest growth
Infosys is expected to report revenue growth of 2.1% QoQ, with margins improving to 21%, leading to profit growth of over 11% year-on-year. HCL Tech may post 1.7% QoQ revenue growth, with margins expanding by 70 basis points.
Wipro’s growth is expected to remain muted, with revenues inching up just 0.2% QoQ and margins dipping.
Tech Mahindra is projected to post 1.1% growth in dollar revenue, supported by both telecom and enterprise businesses, while LTIMindtree may deliver a 2% revenue rise.
Mid-tier IT firms to outperform Tier-1 peers
Mid-tier companies are set to post stronger numbers compared to their larger peers. Coforge is expected to lead the pack with 6% QoQ growth, driven by the Sabre deal. Persistent Systems and Hexaware are also projected to deliver solid growth of 3.7% and 3.2% QoQ, respectively.
Mphasis is seen posting 1.3% QoQ growth, while Firstsource may expand by 2.2%. However, Birlasoft and Zensar are likely to report a sequential decline.
IT sector stocks underperform
IT sector stocks have underperformed the broader market in recent months. The Nifty IT index has fallen 12.68% in the past three months, with TCS shares dropping 15.22% and Infosys down 10.3%.