After Q3 beats, is Indian IT turning the corner?

While earnings surprises in the October-December period boosted sentiment, four of India’s top five IT services companies are now entering the final quarter of FY26 (January-March) with a weaker full-year track than last year, highlighting how poor demand visibility remains for the country’s largest software exporters.

Tata Consultancy Services (TCS) faces the risk of a rare annual revenue decline; Infosys Ltd and HCL Technologies Ltd (HCLTech) are facing slower growth compared to last year, and Wipro Ltd is set for a third consecutive contraction. Only Tech Mahindra Ltd is expected to buck this trend. The outlook points to a third consecutive year of slow growth for India’s IT majors despite visibility into cloud demand from automation, artificial intelligence (AI)-led pricing pressure and tariff uncertainty.

The disconnect between the quarterly gains and the full-year deterioration began to bother analysts. Weak guidance from the top four has led at least one brokerage firm to question whether the country’s largest IT service providers, which account for about a third of India’s $283 billion IT industry, are truly on the verge of recovery, despite cautious optimism from management teams.

“FY27 will be better than FY26. Modestly. Likely the fourth year of slow revenue growth. Slow (old/new) is the normal,” Bank of Baroda Capital Markets analysts Girish Pai and Lopa Notaria said in a Jan. 12 note.

“We see tier 1 growth for FY26 to remain in the low single digits and ‘eating the tariff’ could have a negative impact on FY27,” the analysts added.

TCS: A five-year growth test

TCS, which is at the top of the list, is facing its toughest annual test in recent years. The Mumbai-based company closed the first nine months of FY26 with revenues of $22.4 billion; This shows that it needs $7.78 billion in the January-March quarter to cover $30.18 billion last year.

This would require sequential growth of 3.65%, the fastest pace in five years. The three brokerages now expect TCS to end FY26 with a decline in revenue, which would be its first since its listing in 2004.

“TCS has grown better than Infosys; however, FY26 is likely to be a ‘down’ year for TCS and the company may underperform other major rivals. We see only modest improvement in margins as TCS invests to boost growth,” HSBC analysts Yogesh Aggarwal, Prateek Maheshwari and Sagar Desai said in a Jan. 1 note.

Analysts attribute the pressure to weak demand visibility, a weak pipeline of large deals and customers shifting to competitors. Management has also been more cautious than in October, when it relied on international markets, which accounted for 94% of revenues.

K Krithivasan, CEO of TCS, said during the company’s post-earnings analyst call on ’12: “We have said in the past that we will continue to deliver higher growth in our international market. We have only a quarter left now, but our willingness to make every effort remains. We have seen demand slowly recovering in the second quarter, which continued into the third quarter. In the international market, we are taking every step to ensure that we grow better in FY26 than FY25.” Fireplace.

Infosys, HCLTech: Growing but slowing

The second largest, Infosys, completed the first nine months with $15.1 billion in revenue. A decline in the fourth quarter would be needed to miss last year’s $19.28 billion; That’s not an unusual scenario, considering the company has reported consecutive fourth-quarter declines of more than 2% in each of the last three years. However, growth is expected to slow down.

Management has projected revenue growth of 3-3.5% on a constant currency basis for FY26. It closed last year with a constant foreign exchange increase of 4.2%. Constant currency (CC) excludes the impact of exchange rate movements.

The third largest, HCLTech, which grew at 4.7% last year, has targeted 4-4.5% growth in constant currency this fiscal. Although it is expected to outperform most of its larger peers, management’s tone remains cautious.

“While global market uncertainties persist, leading to slow growth of spend on traditional offerings, underlying demand for technology as a driver for business transformation remains structurally intact,” HCLTech CEO C Vijayakumar said during the company’s post-earnings call on January 12.

HCLTech finished the first nine months with $10.98 billion in revenue and needs a double-digit decline in the fourth quarter to miss last year’s $13.84 billion.

Wipro: Three-year decline approaching

If HCLTech offers relative flexibility, Wipro will continue to lag behind the industry. The fourth-largest IT services firm is headed for a third straight year of revenue decline. It reported revenue of $7.83 billion in the first nine months and needs sequential growth of 1.86% in the March quarter over the same period last year; This would mark the strongest fourth quarter in four years.

Management projected fourth-quarter revenue to be between $2.64 billion and $2.69 billion, indicating a decline at the lower end of the range. At least one brokerage firm expects organic revenue to decline and growth to slow at best.

“We think short-term revenue visibility will remain limited as fewer business days and lagged increases in Q4 together negatively impact growth. Given this, we now see an organic revenue decline of 0.4% in FY26 and overall revenue growth of 0.5% CC on an annual basis,” Motilal Oswal Financial Services analysts Abhishek Pathak, Keval Bhagat and Tushar Dhonde said in a note dated 17. Fireplace.

Investors reacted harshly. Wipro shares closed 8.2% lower on Monday, the first trading day after earnings. ₹245.5, analysts point to low growth visibility and delayed ramp-up of large deals.

Tech Mahindra: One bright spot

Tech Mahindra stands out from the rest. The fifth-biggest player is the only player among the top five expected to improve from last year. It closed April-December 2025 with $4.76 billion in revenue and needs $1.5 billion in the final quarter to reach last year’s total. It would take a revenue decline of around 7% in Q4 for the company to fall short.

Although Tech Mahindra has not provided official revenue guidance, management has stated higher growth expectations.

Bigger worry: AI-led deflation

Beyond individual company performance, analysts see a deeper structural risk from the adoption of automation and artificial intelligence.

“We fear that the adoption of scaled AI companies will be even more deflationary than it was in 2025. We think savings from such AI adoption could go to hyperscalers trying to siphon more money from businesses to finance increased AI spending,” said analysts at Bank of Baroda Capital Markets.

“Trump’s numerous proposals to address the affordability crisis in the US ahead of the midterm elections in November 2026 will be key proposals to watch in 2026.”

For a sector long accustomed to reliable growth in the mid-single digits, quarterly data offers limited reassurance as demand visibility remains poor and growth trajectories continue to soften.