India’s information technology services companies are expected to report another subdued performance for the April-June quarter, as weak discretionary spending, delayed client decision-making and uncertainty around artificial intelligence (AI) continuing to weigh on revenue growth, analysts said.

Mid-tier IT firms are expected to outperform larger peers, supported by large deal ramp-ups and acquisitions, while Tier-I companies are likely to post muted sequential growth, they added. Among large-cap companies, Infosys and Tech Mahindra are expected to perform relatively better.

“We expect a mixed 1QFY27 for large-cap IT. TCS and LTM (formerly LTIMindtree) are likely to report flat QoQ constant currency (CC) revenue growth, while Infosys should lead large-cap growth at 2% QoQ CC (organic 1.0% QoQ CC), supported by acquisitions,” analysts from Motilal Oswal said.

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AI-Driven Pricing Deflation

Reports suggest that demand conditions remain challenging despite continued investment in AI. Enterprises are prioritising cost optimisation, resulting in tighter scrutiny of technology spending, slower decision-making and prolonged deal cycles, analysts said.

They also noted that while AI adoption continues to gather pace, clients are increasingly seeking productivity gains and pricing benefits, adding to pressure on traditional services revenue growth.

“The evolving AI-led tech landscape is weighing on the decision-making process, influencing enterprise spending and investment priorities. Against this backdrop, tier-1 companies are likely to continue facing growth challenges,” Emkay analysts said in a report. The brokerage expects Tier-1 IT companies to post constant currency revenue growth in the range of (-)1.2% to 2.2%.

In addition to AI-led uncertainty, analysts also expect continued volatility at the macroeconomic and geopolitical level to affect revenue growth across Tier-1 companies.

The earnings season for the April-June quarter is expected to begin with TCS, which will report its quarterly results on July 9.

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“Q1FY27 is a seasonally strong quarter; but management commentary during the Q4FY26 earnings season pointed to a soft start to FY27, driven by disruptions arising from the Middle East conflict and ongoing AI-led pricing deflation,” experts from JM Financial said, adding that the June quarter is likely to be weaker than initially anticipated.

Rupee Depreciation

Despite the weak demand environment, margins are expected to remain relatively stable. The brokerages said the depreciation of the rupee during the quarter is likely to offset part of the pressure from wage hikes, investments in AI capabilities and costs related to deal ramp-ups, resulting in a mixed, but broadly resilient margin performance across companies.

Management commentary on demand trends and full-year guidance is expected to be the key focus during the earnings season.