With a volatile macro environment, largely led by geo-political issues and tariff-related uncertainty, Indian IT services firms will report a soft quarter in Q1 FY26 and revenue performance is likely to be weak in an otherwise seasonally strong quarter, according to analysts.
The country’s largest IT services company Tata Consultancy Services (TCS) will release its first quarter results on Thursday- July 10. HCLTech will release its Q1 earnings on July 14 and Infosys on July 23.
Equirus Securities expects mixed results across Enterprise IT services companies with very soft quarters for ER&D (Engineering and Research & Development) services companies on a QoQ basis.
According to Equirus, Infosys might guide for 1.0-3.25% CC growth in US$ sales. It expects Wipro to guide for (-) 1% to (+) 1% q-o-q growth in IT Services US$ sales for 2QFY26E in CC terms.
“We expect 3.4% q-o-q increase in US$ Sales (CC: +1.4% q-o-q growth) for Infosys. EBIT margins are expected to dip by 10bps q-o-q led by wage hikes for leaders/seniors and normalisation of various expenses,” it said.
According to PL Capital, Q1FY26 revenue performance of IT firms is expected to be weak in an otherwise seasonally strong quarter. Although the intensity of tariff uncertainties has reduced to some extent, demand recovery in tariff-induced verticals continues to be weak with global enterprises remaining cautious and sensing near-term uncertainties, it said.
It said despite the deferment in wage hikes, the improvement in margins would either be flat or negligible due to missing operating leverage.
As far as verticals are concerned, BFSI will continue its growth momentum. “Manufacturing and consumer performance is expected to remain on a weaker trajectory, due to mounting pressure on automotive and retail/CPG segments. Deal signing activities are likely to be flat or see slight improvement sequentially, due to slower decision making and incremental scrutiny weighing on deal closure activities,” PL Capital said.
It expects both Infosys and HCLTech to inch up the lower band of the FY26 organic revenue guidance by 100bps.
For TCS, it expects revenue to decline by 0.9% QoQ CC due to ramp down of BSNL deal and weakness continuing in international business. Analysts said clients may not materially postpone their investment when it comes to AI/Gen AI. While Tier I companies are expected to report median revenue decline of 0.7% QoQ CC, Tier II companies are expected to report median revenue decline of 2.5% QoQ CC with sharp decline in Tata Elxsi & Tata Tech due to weakness in the automotive segment.
Analysts also pointed out that non-discretionary spend is taking centre stage instead of wide-spread investments in non-critical activities.
The conversion from TCV (total contract value) to revenue would continue to be challenging for names that are highly exposed to asset heavy or consumer-oriented verticals.