Indian IT services companies are expected to report a slow start to FY27 as macroeconomic uncertainty, weaker discretionary spending, delays in large deal decisions and growing AI-related pressures affect revenue growth during the June quarter, according analysts.
Tata Consultancy Services (TCS) will announce its first-quarter results on July 9, followed by HCLTech on July 13, Wipro on July 16 and Infosys on July 23.
Brokerages expect most tier-I companies to report flat to negative sequential revenue growth in constant currency terms. HDFC Securities expects first-quarter growth for tier-I firms to range between -1.3% and 1.1%, while Kotak Institutional Equities estimates growth of between -1% and 1% for the largest IT companies.
Analysts said the demand environment remains weak as clients continue to delay spending decisions. They also pointed to increasing competition, AI-led pricing pressure and a shift in technology spending towards frontier AI and AI infrastructure companies.
ICICI Securities expects TCS to post 0.3% sequential constant currency revenue growth. The brokerage said delays in converting total contract value into revenue have affected growth across sectors because of weak macro conditions linked to the ongoing West Asia war. It expects the banking, financial services and insurance business to support growth through the execution of two large deals secured earlier.
TCS announced nine large deals during the quarter, including an agreement with Swedish industrial engineering company SKF for an AI-led business transformation. ICICI Securities expects quarterly deal bookings of between $9 billion and $11 billion. It also expects EBIT margin to decline by 150 basis points because of the annual wage hike, AI investments and higher sales and marketing spending, partly offset by currency movements.
Infosys is expected to report 0.9% organic sequential constant currency growth, while the consolidation of the Optimum Healthcare acquisition is expected to lift total growth to 1.8%, according to ICICI Securities. The brokerage expects slower client decision-making to affect volumes during April. It said banking, financial services and insurance, along with energy, utilities and resources, are likely to lead revenue growth.
HCLTech is expected to report a 0.9% sequential decline in constant currency revenue because of spending cuts by telecom clients and the discontinuation of SAP programmes by manufacturing and retail customers. The brokerage expects its EBIT margin to decline by 25 basis points due to restructuring costs and AI investments.
Brokerages also expect companies to revise guidance. Motilal Oswal Financial Services expects Infosys to reduce the upper end of its FY27 revenue growth guidance by 50 basis points and HCLTech to lower the upper end of its services growth guidance by 100 basis points.
Commentary on hiring and demand will also remain in focus. BNP Paribas said, "This measured momentum suggests IT Services hiring is settling into a slower pace of net additions, with companies staying selective even as they continue to invest in AI talent at a healthy pace."
TCS Chairman N Chandrasekaran recently said the company will no longer hire at the scale it did in the past as AI agents begin taking over parts of the work currently performed by humans.
