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Center-Center-DelhiTop domestic IT firms closed FY26 with steady profits but slowing growth, cautious FY27 guidance, and delayed client spending, even as deal pipelines remain strong.
The March quarter earnings of Tata Consultancy Services, Infosys, HCLTech, Wipro and Tech Mahindra reflect a sector that is stable on profitability but clearly slowing on growth, with companies flagging cautious client behaviour and limited visibility.
Across FY26, the slowdown became more pronounced. Growth for large IT firms slipped to low single digits, extending a multi-year deceleration from post-pandemic highs. Among Tier-I companies, HCLTech reported the highest constant currency growth at 3.9%, below its own 4–4.5% guidance. Infosys grew 3.1%, while Tech Mahindra posted just 0.6% growth. Tata Consultancy Services and Wipro saw revenues contract by 2.4% and 1.6% respectively.
Even so, profitability held up in the March quarter. Infosys reported a 20.8% YoY rise in net profit to about Rs 8,500 crore, while Tech Mahindra posted a 16% increase in profit and beat revenue expectations. TCS also reported double-digit profit growth supported by large deal wins.
Deal Wins
A key theme across companies is that demand remains intact but is taking longer to convert into revenue. Deal wins continued at a strong pace. TCS ended FY26 with total contract value of $40.7 billion, among its highest ever. Infosys reported $14.9 billion in large deals, with more than half being net new.
“We see sustained customer conviction in technology investments,” said TCS CEO K Krithivasan. Infosys CEO Salil Parekh said strong deal wins reflect the robustness of our enterprise AI value proposition.
However, the slowdown is becoming visible after deals are signed. Companies reported slower ramp-ups, delays in project execution and reduced discretionary spending by clients. “Clients kept a tight lid on discretionary spending,” HCLTech said while guiding for 1–4% growth for FY27.
Client-specific issues also weighed on performance. HCLTech CEO C Vijayakumar said two US-based clients significantly reduced spending and two SAP projects were cancelled, with a 50-basis point impact on growth. “We talked about two client-specific reductions… and we are assuming that might get even worse during the year,” he said. He also noted the company had “voluntary losses” of about $1 billion in bookings.
Wipro similarly flagged “client-specific issues” and delays in large deal ramp-ups affecting parts of its business.
AI shift
Another structural shift is the changing nature of technology contracts. Traditional large outsourcing deals are being replaced by smaller, phased and outcome-based engagements, particularly in artificial intelligence (AI). These contracts take longer to scale and generate revenue.
The rise of AI is also beginning to affect pricing. As automation improves productivity, clients are pushing for cost savings to be reflected in contracts. HCLTech said AI-led efficiencies could lead to a 2–3% annual deflation in pricing. “AI deflation could be 2 to 3 percent a year,” Vijayakumar said, adding that pricing is being reset even as demand remains steady.
Outlook
The broader outlook remains cautious. Infosys has guided for 1.5–3.5% growth for FY27, while industry growth is expected to remain in the low single digits.
Global IT spending is set to rise 13.5% in 2026 from the previous year, reaching $6.3 trillion, according to new figures released by Gartner.
IT services will remain the largest spending category overall, projected to exceed $1.87 trillion in 2026. This includes services such as application and infrastructure implementation, managed services, and cloud-based offerings like IaaS.