With the fiscal first quarter earnings season set to kick off this month, starting with Tata Consultancy Services (TCS) on July 10, analysts expect a mixed performance from Indian IT services firms. Macro uncertainty, tariff-related headwinds, and early signs of a discretionary spend rebound are likely to shape Q1FY26 results.

Nuvama said, “Q1FY26 marks the start to a possibly tumultuous year, with tariff uncertainty looming large on the businesses. However, the macro environment has not deteriorated further since Mar-25, with most companies likely to post quarterly numbers in line with estimates.”

While large caps are expected to report a subdued quarter with most companies except for Infosys and LTIMindtree likely posting a sequential drop in revenues, Tier-2 and select mid-cap firms are expected to outperform. This would be buoyed by robust deal wins and favorable cross-currency trends.

Nomura said, “We estimate QoQ revenue decline in constant currency (or cc) terms of 0.5 per cent for TCS, 1.5 per cent for HCL Tech, 2.5 per cent for Wipro, and 0.8 per cent for Tech Mahindra. We expect QoQ revenue growth of 1.8 per cent for Infosys (including 30bp from acquisitions) and 1 per cent for LTIMindtree. Mid-caps are likely to do better, in our view.” It further added that small caps are expected to report a revenue growth of 2 per cent. 

IT sector Q1 preview: Deal wins & commentary

Companies across the board—especially Infosys, Coforge, and TCS—have secured strong deal wins this quarter. Investors and market participants will track commentary on execution, vendor consolidation, and deal pipelines.

Nuvama said, “Deal flows are likely to remain strong despite a volatile demand environment, with cost takeout deals contributing the bulk of incremental wins. Almost all companies have announced solid large deal-wins during the quarter.” 

IT sector Q1 preview: Margins to be a mixed bag 

While some companies will benefit from wage hike deferrals and cost control, others face margin compression from reinvestments or debt provisioning. According to analysts, margins are likely to  stay stable with wage hikes delayed across the board. 

Among large-cap IT firms, Nomura said, Infosys is expected to see a 30 bps sequential decline due to salary hikes for senior staff, HCL Tech to report a 90bps drop driven by seasonal factors like annual productivity benefits passed on to clients, Wipro could see a 40bps dip owing to increased provisions for doubtful debts from specific clients, and TCS may post a modest 10bps fall as weak utilisation offsets gains from lower pass-through revenue related to BSNL. 

On the positive side, it added, LTIMindtree is projected to improve margins by 50bps and Tech Mahindra by 30bps, both benefiting from ongoing cost optimisation efforts.

Further, among mid-cap firms, Coforge is expected to lead with a 40bps sequential margin improvement, while Mphasis and Persistent Systems are likely to report flat margins. 

In the small-cap segment, Firstsource Solutions may see a 20bps uptick, whereas Birlasoft could face a 30bps decline due to negative operating leverage, and eClerx may post a steep 180bps drop driven by salary hikes.

Tariff & macro outlook

The IT sector will remain cautious, though the 90-day tariff pause by the US has provided temporary relief. While the demand in BFSI is expected to remain resilient, core manufacturing will face continued uncertainty.

Nomura said, “Our channel checks suggest that demand remains healthy in the BFSI vertical, aided by strong results from global banks and no significant impact (unlike core manufacturing sectors) from ongoing tariff issues.”

To put things into perspective, Accenture’s recent results show sustained strength in the BFSI segment with the overall demand remaining steady, helped by the 90-day suspension of tariffs announced by the US administration in early May. Deal activity continued to focus on cost optimization and vendor consolidation, as clients maintained their emphasis on savings. A favourable tariff environment could potentially support a short-term recovery in discretionary spending, possibly by 2QFY26F. “We think a benign tariff outlook may lead to an improvement in discretionary spend in the short term (read 2QFY26F),” Nomura said.

IT sector Q1 preview: Guidance Watch

– Infosys may upgrade revenue growth guidance slightly, from 0–3 per cent to 1–4 per cent.

– HCL Tech and Wipro are likely to retain existing FY26 guidance.

– Wipro may guide for flat or negative QoQ growth for Q2FY26.

To conclude…

The IT sector, Nuvama concluded, has seen a strong rebound in the past two months, driven by optimism that the impact of the tariff wars will be limited. The brokerage firm said that the technology spending is believed to no longer be deferred much longer, especially since it has already been delayed for over two years. 

“We reckon a recovery in tech spends soon, leading to handsome returns for investors over the medium to long term. In the near term, volatility might persist with a rapidly changing macro environment. We stay positive on select Tier-1 (TCS, Infosys and HCL Tech) and most Tier-2 names (Coforge, Persistent, Mphasis and LTIMindtree),” Nuvama said.