In charts: Sombre mood grips India’s top IT firms amid tariff tantrums

This time, uncertainties surrounding US-imposed tariffs—likely to fuel inflation and trigger a broader global slowdown—are casting a shadow over the sector’s outlook.

A Mint analysis of the transcripts of the earnings conference calls by the big four of the IT industry—Tata Consultancy Services (TCS), Wipro Ltd, Infosys Ltd, and HCL Technologies—shows that conversations about artificial intelligence (AI), uncertainty and tariffs dominated discussions in the fiscal fourth quarter (Q4FY25).

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While the conversations around AI and GenAI were largely positive, a significant increase in the usage of words like uncertainties (59 times in Q4 vs 10 times in Q3) and tariffs (29 times in Q4 as opposed to just once in Q3) indicates a more cautious tone, reflecting expectations of a slower 2025–26. Company guidance has already factored in the potential risks.

“Broadly speaking, even a minor slowdown (in the US) poses a significant problem. The US-based companies will likely postpone IT investments, focusing only on essential core development and avoiding discretionary spending,” said Sumit Pokharna, vice president at Kotak Securities.

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The cracks are already showing: the number of clients generating over $100 million in trailing 12-month revenue for India’s top four IT firms has dropped to a six-quarter low of 142.

Revenue review

After clocking double-digit growth in FY22 and FY23, revenue at India’s top IT firms has slowed to low single digits over the past two years. 

In Q4FY25, revenues at three of the big four fell by 0.8–3.5% from the previous quarter, underscoring the impact of a major disruption. A report by Emkay Global, dated 21 April, highlighted that the IT companies had not reported negative sequential growth rates outside recessions witnessed during the global crisis of 2008 or the 2020 pandemic.

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While these firms posted sequential growth in total contract value in Q4, they failed to match year-ago levels. Experts warn that many of these deals, likely signed before the tariff escalations, now face the risk of delay.

Rising resignations

After a period of relative stability, attrition rates—the proportion of employees who left an organization over the past 12 months—are once again climbing at India’s top IT firms, adding to the challenges posed by muted revenue growth and a subdued outlook.

While HCL Technologies and Wipro saw a modest 20 basis point decline in attrition compared to the previous quarter, the rates increased for the other two by 30-40 basis points. 

Year-on-year, attrition was up across all four companies, with Infosys recording the sharpest increase. Despite the dip in Q4, Wipro continued to have the highest attrition among the big four.

Amid looming macroeconomic uncertainties, TCS has already deferred its annual wage hikes, which were due in April. If other firms follow suit, it could further dampen sentiment among the sector’s massive workforce—already grappling with renewed turnover pressures.

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Such moves, if followed by other companies, could also dampen the outlook for the IT industry’s sizeable workforce, which had until last year struggled with high attrition rates.

Dangers of dependence

India’s IT sector is a major driver of white-collar jobs and essential to the country’s economic growth. However, the sector—particularly the major players—remains heavily reliant on the Americas, including the US, and Europe. Despite efforts by top firms to reduce dependence on the US, business from the country continues to dominate their portfolios.

In addition to the risks posed by tariffs, the sector is also grappling with slow growth in Europe. And the future holds further challenges.

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“The US, for the first time ever, has a problem of high fiscal deficit, high interest rates, and high core inflation, and is resultantly going into a slowdown/recession, even before considering the tariff impact,” Emkay Global noted. 

While the top IT companies seem to have factored in the potential risks in their guidance, it does not look like FY26 will be a year of revival for the sector.