Indian IT Sector Anticipates Modest Growth in Q1FY26

Overview of IT Sector Growth Expectations

New Delhi, July 8: A recent report indicates that the Indian IT services industry is likely to see only modest growth in the first quarter of FY26, despite the usual seasonal uptick.

According to Equirus Securities, the earnings of IT firms are projected to vary significantly, with a particularly weak quarter anticipated for engineering research and development (ER&D) service providers on a quarter-on-quarter (QoQ) basis.

The report evaluates major players like Infosys and Tech Mahindra among large-cap firms, while also considering mid-cap companies such as Zensar, Mphasis, and KPIT eClerx.

Equirus predicts a revision in Infosys's sales growth forecast for FY26, alongside subdued growth among the top six large-cap IT firms.

"Infosys is expected to guide for a growth range of 1.0-3.25% in constant currency (CC) terms, reflecting an incremental inorganic growth contribution of approximately 0.4% (up from the previous guidance of 0-3%), while maintaining its EBIT margin guidance of 20-22% for FY26," the report states.

"The top six large-cap companies are projected to experience QoQ growth ranging from a decline of 2.6% to an increase of 1.4% in US$ sales in CC terms for Q1 FY26. Equirus anticipates significant cross-currency tailwinds for these firms, estimated between 120-230 basis points QoQ," it added.

On a more positive note, the firm expects some mid-cap IT and BPO service providers to perform well in terms of sales.

While demand commentary remains cautious, there are indications that vendors are experiencing improved demand conditions in the banking, financial services, and insurance (BFSI) sector.

The report forecasts that TCS's US$ revenue may decline by 0.4% QoQ in CC terms, primarily due to a reduction in the BSNL contract and a slowdown in international market sales growth.

Equirus also predicts that Wipro's US$ sales will decrease by 2.6% QoQ in CC terms, whereas HCL Tech is expected to see a 1.4% growth in US$ revenue QoQ.

Tech Mahindra's US$ sales are projected to fall by 0.8% QoQ in CC terms, attributed to seasonal softness in Comviva and ongoing demand challenges from certain high-tech clients.