With HCLTech missing Street estimates on both revenue and net profit front during the January-March quarter, the country’s top four IT services firms showed subdued growth, primarily due to seasonal weakness, reduced discretionary spending, and global economic uncertainties, including US macroeconomic challenges and new tariffs.
While sequential growth was visible in some metrics, the Street remained cautious as all four firms issued muted guidance for FY26. However, AI (GenAI) is continuing to drive client interest and featured heavily in new deals.
While missing Street estimates, HCLTech managed to roll out a better guidance for FY26 compared to its peers.
The Noida-headquartered company’s consolidated revenue rose 1.2% quarter-on-quarter to Rs 30,246 crore. But, it was lower than the analysts’ estimate of Rs 30,262 crore as polled by Bloomberg.
However, the company’s FY26 revenue guidance stood out positively among peers. It expects constant currency revenue growth of 2%-5%, even as it acknowledged the growing impact of tariffs and global fragmentation. The company maintained its Ebit margin guidance at 18-19%.
“We believe discretionary spending will continue to be subdued in this environment. Geopolitical factors like tariff and de-globalisation are expected to impact IT services. In the coming months, it will be an important topic to observe and monitor the ongoing development,” C Vijayakumar, CEO and managing director of HCLTech said.
Meanwhile, the operating margin, also known as the earnings before income and tax, fell 160 basis points quarter-on-quarter to 17.9%. The bottomline also fell 6.2% sequentially to Rs 4,307 crore in the March quarter and was also lower than the analysts expectation of Rs 4,339 crore.
On the deal front, HCLTech saw a sequential increase in deal wins taking the total contract value to a near $3 billion against $2.1 billion reported in the December quarter.
“We are seeing GenAI becoming a core element of nearly every deal,” Vijayakumar noted. “One large deal was delayed at the last moment, but the deal pipeline remains near an all-time high.”
While all four companies reported revenue growth for Q4FY25, they were generally below market expectations. The profit results were, however, mixed with Infosys and Wipro reporting a sequential increase and TCS and HCLTech reporting a decline.
Looking ahead, the guidance for FY26 remains subdued across the sector. TCS, despite showing optimism about the longer-term outlook, gave a cautious forecast.
Infosys issued a weak forecast of 0%-3% growth in constant currency terms for FY26, down significantly from the 4.5%-5% guidance for FY25.
Wipro’s outlook was the weakest of all, forecasting a 3.5% to 1.5% decline in revenue for Q1FY26, its weakest-ever guidance.
The uncertainty in client decision-making was a recurring theme across all earnings calls. While TCS noted the impact of project deferrals, Wipro, and HCLTech, noted the direct impact of US tariffs on sectors such as manufacturing and retail. Infosys also noted that clients were becoming more cautious with spending.
Despite the overall uncertainty, there was a consensus that the rise of Generative AI (GenAI) could help mitigate some of the challenges in the sector.
HCLTech’s Vijayakumar mentioned that “GenAI is becoming a core element of nearly every deal,” emphasising the growing importance of AI solutions in driving efficiency and cost reductions for clients. Infosys’s Parekh echoed this sentiment, noting that “GenAI is helping in increasing efficiency, lowering costs, and improving the user experience for our clients.”
Similarly, TCS noted that the broader shift towards AI and automation is helping clients become more efficient. However, the delayed decision-making continued to cloud prospects.
Despite weaker-than-expected results, the deal pipeline remains robust for most companies. TCS’s total contract value (TCV) for the quarter increased to $12.2 billion, compared to $10.2 billion in Q3.
Wipro secured 17 large deals worth $1.8 billion, while Infosys signed $2.6 billion in large deals, slightly up from the $2.5 billion recorded in Q3.
TCS said that although there were delays in some discretionary investments, “all business verticals and major markets are growing,” with strong deals being booked in key sectors like financial services.
Similarly, Infosys saw significant growth in the financial services sector, which rose 12.6% YoY. However, segments such as retail, life sciences, and high-tech saw declines.