Muted Q4 for Indian IT on Iran Tensions, AI Fears

Brokerages expect India’s top IT firms to post another subdued quarter, with around 10% year-on-year growth driven largely by a weaker rupee rather than strong demand. Geopolitical tensions, weak discretionary spending and AI-related concerns continue to pressure client budgets, keeping the outlook for the next fiscal year in focus. Major players including Tata Consultancy Services, Infosys and HCLTech will start announcing Q4 results from April 9, 2026.

Ambit Capital analysts expect limited deal wins, uneven growth beyond the BFSI segment and a slow start to FY27 amid macroeconomic and GenAI uncertainties. The rupee’s roughly 4% decline against the US dollar in the March quarter is likely to support margins, as IT firms earn in foreign currencies while incurring most costs in rupees. The $315 billion sector, which employs about 5.9 million people, has faced softer demand since early 2023 as clients cut discretionary spending, deal cycles lengthened, and spending shifted toward cost optimisation and AI-led projects.

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IT Outlook: Modest Growth, Weak Demand

Brokerages expect Infosys and HCLTech to guide for modest FY27 revenue growth of 2%–4% and 4%–6%, respectively. They expect the top six IT firms—TCS, Infosys, HCLTech, Wipro, Tech Mahindra and L&T Technology Services—to post around 10.9% revenue growth and 10.3% profit growth in the March quarter. However, analysts see constant currency growth for the top players at just 1.8% for the year, highlighting weak underlying demand. They also expect uneven performance, with banking and financial services holding up better, while retail, healthcare and hi-tech segments face pressure from softer discretionary spending.

Jefferies analysts say client budgets have largely remained unchanged and discretionary spending continues to stay weak. HSBC analysts add that even modest revenue guidance could lift IT stocks, as current valuations already reflect low growth. Motilal Oswal analysts note that while AI-related risks remain difficult to assess, IT firms must now prove their ability to adapt and grow. Investors have pushed shares of IT services companies down about 20% this year on concerns that advanced AI tools could disrupt traditional business models, compared with a 13% decline in the broader Nifty 50 index.

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