Indian IT firms face subdued fourth quarter as war, AI concerns persist; weak rupee helps earnings
Written by: Haripriya Suresh and Bharath Rajeswaran
BENGALURU, April 6 (Reuters) – India’s leading information technology firms are set to report yet another sluggish quarter, with revenue and profits rising around 10% year-on-year due to a weaker rupee rather than underlying growth, seven brokerage firms said.
Uncertainties from wars, weak discretionary spending and concerns about artificial intelligence will continue to put pressure on customer budgets, making revenue forecasting for the next fiscal year a key focus for investors.
Tata Consultancy Services, Infosys, HCLTech and other software services exporters will report fourth quarter results from April 9.
“We expect limited deal-winning surprises, uneven growth from BFSI and slow start (first half of 2027) on macro/gen AI uncertainty,” Ambit Capital analysts said in a preview note.
The Indian rupee fell 4% against the US dollar in the March quarter, falling to record lows.
Software services companies often benefit when they invoice in foreign currencies, bearing most of the costs in rupees, inflating profits when converted to dollar revenues.
The $315 billion industry, which employs approximately 5.9 million people, last reported double-digit revenue growth in the March 2023 quarter. Since then, demand has softened as customers cut discretionary spending, deal cycles lengthen, and spending shifts towards cost optimization and AI-led projects.
Infosys and HCLTech are likely to submit annual revenue estimates of 2%-4% and 4%-6% growth respectively for fiscal 2027, brokerages said.
Revenue of the top six firms (TCS, Infosys, HCLTech, Wipro, Tech Mahindra and LTM) is expected to grow around 10.9% year-on-year in the March quarter and net profit is expected to rise 10.3%.
On a constant currency basis, or if exchange rate effects are eliminated, the top four IT firms are more likely to see revenue growth of just 1.8% for the year, Ambit said.
Analysts at Yes Securities said performance is likely to be uneven due to relative resilience in banking and financial services, while retail, healthcare and high-tech segments may face pressure due to greater exposure to discretionary spending.
“Our recent interactions suggest that overall client budgets have not increased materially and discretionary spending has remained at bay,” analysts at Jefferies wrote in a preview note. he said.
But HSBC analysts noted that even a modest revenue forecast could support stock prices, noting that valuations currently reflect only low-single-digit growth.
While fears about impact from AI “are difficult to verify or falsify, the burden of proof is now on the shoulders of IT companies. Re-rating therefore depends on evidence of survival and development,” analysts at Motilal Oswal said. Shares of IT companies have fallen 20% so far this year as investors worry that advanced AI tools launched by Anthropic and Palantir could disrupt IT’s traditional business models and undermine businesses. Nifty 50 fell 13%.
(Reporting by Haripriya Suresh and Bharath Rajeswaran in Bengaluru; Editing by Nivedita Bhattacharjee)
