Top-tier IT cos to see modest Q1 growth; mid-tier firms poised to outperform: IT analysts | Company Business News

New Delhi, Jul 8 (PTI) Top Indian IT companies are bracing for a “modest” Q1 FY26, hurt by sluggish demand in various verticals, such as consumer and manufacturing segments, but mid-tier firms should fare better, according to brokerages.

A weak dollar against a basket of major currencies will lead to 100-200 basis points of cross-currency upside, aiding estimates, analysts said.

The IT earnings season opens on Thursday (July 10) with results of Tata Consultancy Services (TCS), followed by HCL Tech on July 14, and Tech Mahindra as well as L&T Technology Services on July 16. LTIMindtree is scheduled to announce Q1 numbers on July 17, while Infosys will declare its numbers on July 23.

“The IT sector is expected to post mixed revenue growth in Q1, with tier-1 reporting muted constant currency revenue growth, while mid-tier is expected to deliver strong growth,” HDFC Securities said in a note on Q1 FY26 results preview.

The huge cross-currency tailwind in the quarter will result in strong US dollar growth sequentially in terms of revenue.

HDFC Securities believes that companies will maintain their full-year FY26 guidance amid the ongoing global economic uncertainty.

Factors, such as US tariff measures and broader macroeconomic challenges, may limit discretionary spending, but demand deterioration has been lower than expected at the start of the quarter.

“The deal pipeline remains robust, particularly in areas like cost optimisation, infrastructure modernisation, and AI initiatives,” it pointed out.

ICICI Securities opined that the 90-day pause in the US tariffs standoff has somewhat quelled economic nerves in the largest market for IT companies, with Nifty IT rallying about 10 per cent over the last two months.

“Yet, this detente has failed to spur a corresponding uptick in new deal closures. Given the backdrop, we anticipate modest revenue growth for IT companies (except Coforge and Persistent) and the ER&D (Engineering Research and Development) pack in Q1FY26,” it said, noting that cross-currency tailwinds will likely provide about 100–200 basis points of quarter-on-quarter lift to dollar revenue growth.

Put simply, one basis point is one-hundredth of a percentage point.

ICICI Securities, in its report, pointed to a wider growth gap between mid-cap and large-cap peers. The ability to proactively shape large deals and quickly tap into high-growth areas, and a larger revenue share from the BFSI vertical, which seemingly is not affected by the tariff-led macro friction, were cited among the reasons for this.

“Demand remains sluggish in consumer, manufacturing, auto, logistics and communication verticals. With the sector beset by a volatile macro environment, deal TCV (Total Contract Value) shall be a crucial metric to be watched closely,” ICICI Securities said.

According to a report by Motilal Oswal, while a host of geopolitical events as well as tariff uncertainty would have played spoilsport on notable deal signings, widespread client deferrals/ ramp-downs have largely been avoided.

“We expect 1Q numbers to reflect this reality: QoQ revenue and deal TCV across large-caps could be unexciting (expect QoQ cc growth range of -2.5 per cent to 1.5 per cent for large-caps. Mid-caps are expected to outperform once again with a growth range of -2.0 per cent to 7.0 per cent),” it said. It asserted that a weak dollar against a basket of currencies will lead to 100-200bp of quarter-on-quarter cross-currency tailwinds, aiding estimates.

Prabhudas Lilladher observed that 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.

Q1FY26 revenue performance is expected to be weak in an otherwise seasonally strong quarter, it added.