All eyes are on Tata Consultancy Services (TCS) as it prepares to announce its earnings for the January–March quarter on April 10, kicking off the corporate earnings season. Analysts will closely watch not just the numbers but also the management commentary for cues on what FY26 might hold for the domestic IT services sector. Expectations of a meaningful recovery this fiscal, after two years of sluggish growth, have been shaken by a new wave of uncertainty stemming from President Donald Trump’s reciprocal tariffs announced on April 2.
Although these tariffs don’t directly hit the domestic IT services firms, which derive 40-50% of their revenue from the US, they are expected to ripple through the American economy. The likely fallout: higher inflation, slower GDP growth, and tighter corporate budgets. All of these indirectly pressure technology spending, especially discretionary projects, precisely the kind that has been slow to return since the global slowdown in 2022.
As a result, the IT industry, which for long has been seen as a proxy for global economic confidence, now finds itself navigating another layer of complexity. Until recently, analysts were hopeful that FY26 would bring a broad-based recovery across sectors like financial services, retail, manufacturing, and communications. That optimism, however, is quickly giving way to caution.
The importance of TCS’ upcoming earnings lies not just in its own performance but in the broader signals it may send. With its global client base and large deals pipeline, the company often acts as a bellwether for the entire industry. Investors and analysts will be keen to hear what the management says about deal momentum, client budgets, and visibility for the coming quarters.
“The good news is the uncertainty is behind us — we are in the pit,” said a recent report from Motilal Oswal. “Discretionary spend is dead, and survival spend will now again become the clear priority. Budgets will be trimmed, and tech spends will be redirected toward extreme efficiency and resilience,” it said.
IT stocks have already taken a hit in the markets. On Monday, shares of major players like Infosys, TCS, HCL Technologies, and Wipro fell between 1% and 4%. Mid-cap firms such as Coforge and Mphasis saw even steeper declines, dropping between 4% and 6%. The Nifty IT Index has corrected by 25% over the past three months.
Prabhudas Lilladher summed up the mood: “Until Q3FY25, gradual recovery in demand was visible within certain pockets; however, all this could change quickly with inflationary trade policies further escalating uncertainties among global enterprises and requiring them to revisit budgetary spends”.
Brokerages have begun revising growth forecasts in response. Kotak Institutional Equities and Motilal Oswal now expect top-tier IT firms like TCS, Infosys, HCL Tech, Wipro, and Tech Mahindra, to clock a maximum of 5% constant currency revenue growth in FY26. JM Financial has cut its estimate from 7.8% to 5.8%.
“While the IT sector is not directly impacted by Trump’s tariff order, there may be indirect impacts from slower GDP growth due to higher tariffs, which may impact demand from manufacturing/logistics and retail verticals despite rate cuts,” Jefferies said in its report.
By vertical, the outlook remains uneven. Financial services may cut or defer non-essential tech projects, focusing instead on compliance and operational efficiency. In manufacturing, margin pressure could delay investment in large transformation programmes. Retail and consumer sectors are likely to sharply reduce discretionary technology spending. The telecom segment, relatively insulated, may continue investments in network automation and AI-led operations.
At the heart of the concern is the nature of Trump’s proposed tariffs. Aimed at bolstering domestic manufacturing, these policies risk escalating inflation and increasing costs for American companies. If implemented, they could discourage large-scale tech upgrades or transformation deals, which are key drivers of growth for Indian IT firms.
The sector’s deep reliance on US clients means even small shifts in American economic policy reverberate widely.