IT services firms are preparing for another subdued quarter as global macro uncertainty, tight discretionary budgets, and cautious client spending weigh on what is usually a seasonally stronger period. The recent changes to US H1-B visa rules have further added to the sector’s unease, limiting near-term optimism.
Analysts expect the July-September quarter numbers to show muted sequential growth, with large-cap firms likely to report flat to marginal constant currency (CC) expansion of up to 1.8%. Mid-tier firms could fare slightly better, supported by cost-optimisation work and early traction in AI and digital transformation deals.
The IT earnings season will start with TCS announcing its results on October 9.
Large-Cap IT giants face near-flat Growth
Brokerages expect Infosys and LTIMindtree to lead among the larger players with around 1.8% quarter-on-quarter growth in CC terms, while TCS, HCLTech, Wipro, and Tech Mahindra are seen posting largely flat trends.
The mid-tier pack comprising Persistent Systems, Mphasis, and L&T Technology Services, is expected to outpace their bigger peers, aided by small but steady ramp-ups in AI-led and digital engineering programmes. Persistent’s CC revenue could rise about 3.5%, followed by Mphasis at 1.8% and LTTS at 1.2%, according to HDFC Securities.
“The overall deal environment appears stable, with traction in cost take-out and infrastructure modernisation deals,” HDFC Securities noted. “AI initiatives are starting to move from pilots to production, indicating the first signs of real deployment,” it said. Even so, conversion cycles remain long, and large discretionary projects continue to face delays.
Dual challenge: Macro demand vs. Regulatory pressures
Margins are likely to remain steady, helped by the rupee’s depreciation but tempered by selective wage hikes and pricing pressure. Infosys’ operating margin is expected to stay in the 20–22% range, HCLTech around 17–18%, and TCS near 26–28%. Most firms are running at high utilisation levels, which means hiring will remain muted through the quarter.
Analysts at Motilal Oswal said clients remain reluctant to commit fresh budgets to large-scale programmes, with tariff volatility and broader macro concerns weighing on sentiment. They believe FY26 will remain a year of modest growth, broadly in line with FY25.
While the near-term outlook stays subdued, firms are betting on AI-led transformation deals to pick up in the second half of the year. “Currency gains could offer short-term margin relief,” HDFC Securities added, “but structural pressures from pricing resets and evolving delivery models will keep profitability in check”.