Large-cap domestic IT services companies are expected to post modest sequential revenue growth of 0.3–2.2% in the December quarter, with results likely to underline stability rather than a clear acceleration in demand, according to analysts.
The quarter’s performance is expected to be driven largely by deal ramp-ups and company-specific factors, rather than any broad-based improvement in client spending. Analysts at ICICI Securities said they expect constant currency growth of 0.3–2.2% quarter-on-quarter for the top IT companies, supported by resilient BFSI execution and the ramp-up of large deal wins, but partly offset by seasonal furloughs.
Among the large caps, HCL Tech is expected to outperform peers in Q3FY26, aided by seasonality in its software products business. Wipro is likely to see benefits from the ramp-up of large vendor consolidation deals and early contributions from recent acquisitions. In contrast, TCS and Infosys are expected to report softer sequential growth, as furlough-related headwinds and fewer working days weigh on near-term momentum despite steady execution in core verticals.
Why Seasonal Headwinds Obscure Underlying Demand
Seasonal furloughs, muted discretionary spending and calendar-related factors are expected to cap quarter-on-quarter growth across the sector, even as BFSI-led deal execution offers some support. Analysts note that these factors have become a recurring feature of the December quarter and continue to obscure underlying demand trends.
Operating margins across large IT firms are expected to remain range-bound. Currency tailwinds and AI-led productivity improvements could provide some cushion, but wage hikes, softer utilisation and the initial costs of ramping up new deals are likely to limit any meaningful expansion. ICICI Securities expects margin movement for the top four IT companies to stay within a narrow band, pointing to the absence of operating leverage in the current demand environment.
Beyond the large caps, analysts expect year-on-year growth trends to look healthier, even as sequential performance reflects seasonal softness. “Overall demand is largely unchanged, with restrained discretionary spending and cautious client stance amid macro uncertainty,” analysts at Emkay Research said. They added that visibility on any acceleration is likely to improve only after calendar year 2026 budgets are finalised, though improved deal conversions and fewer deferrals are helping stabilise growth.
A similar view was echoed by analysts at Motilal Oswal, who said macro and tariff-related uncertainty, alongside the transition to a new technology cycle, continues to make clients cautious about committing incremental spending to large programmes. As a result, demand is expected to remain steady, at best marginally incremental, until planning cycles reset and budgets firm up around January 2026.
Beyond Productivity
Artificial intelligence is expected to feature prominently in management commentary this earnings season, though its near-term impact remains skewed towards productivity rather than incremental revenue. ICICI Securities noted that AI-led efficiency gains are increasingly embedded in delivery models, creating a deflationary impact on revenue growth. Emkay Research added that AI’s direct revenue contribution remains difficult to isolate, as most AI work is bundled within broader transformation deals rather than sold independently.
Headcount trends remain subdued, reflecting slower revenue growth and productivity gains from AI. However, companies continue to hire freshers to rebalance their workforce pyramid. TCS plans to hire 42,000 freshers in FY26, up from 40,000 in FY25, while Infosys expects to onboard 20,000 freshers compared with 15,000 last year. HCLTech and Wipro have also indicated plans to hire 10,000–12,000 freshers each in FY26.