Indian IT Firms Brace for Another Weak Quarter Amid Tepid US Demand
India’s top information technology firms are expected to post another subdued quarter as weak client spending in the United States and seasonal holiday shutdowns continue to dampen revenue growth. Analysts from nine brokerages forecast muted results for the December quarter, underscoring the industry’s struggle to regain momentum after a challenging year.
Brokerages Expect Modest Revenue and Profit Growth
According to estimates, the six largest IT companies by revenue will record around 4% year-on-year growth in revenue and a 5% increase in profit, down from 6.5% growth in the previous quarter. The figures highlight the lingering effects of global economic uncertainty and reduced enterprise technology budgets.
The Indian IT industry, valued at approximately $283 billion, continues to face macroeconomic headwinds. Analysts point to U.S. tariff uncertainty, concerns over proposed $100,000 visa fees, and restrained corporate spending as major obstacles. As the United States remains the key market for Indian software exporters, its economic slowdown has had a direct impact on performance.
The sector’s recent underperformance reflects this trend. The Nifty IT index fell 12.6% in 2025, making it the worst-performing sector in India, while foreign investors pulled $8.5 billion from IT stocks—almost half of total equity outflows during the year.
TCS to Kick Off Earnings Season
Tata Consultancy Services (TCS), India’s largest IT company, will open the earnings season on 12 January. Analysts expect its revenue to rise by 4.2% year-on-year, compared with 5.6% growth a year earlier. Infosys and HCLTech are projected to post growth of 8.1% and 4.6%, respectively. Most analysts do not expect either company to revise their full-year revenue forecasts of 3%–5% for Infosys and 2%–3% for HCLTech.
The December quarter traditionally poses challenges for IT firms due to fewer working days and lower billing activity during global client holidays. Margin pressures are also likely to persist, with analysts citing furloughs and wage increases at major firms including TCS and Wipro.
Outlook and Emerging AI Opportunities
While short-term challenges remain, brokerages believe there could be gradual improvement from mid-2026. The banking, financial services and insurance (BFSI) sector continues to show resilience, and deal ramp-ups are beginning to take shape.
Although India lacks pure-play AI companies, leading IT firms are building artificial intelligence capabilities through acquisitions and partnerships. Brokerages expect this trend to strengthen over the next six months, potentially spurring demand into 2026.
“Clients remain cautious about committing incremental spending to large programmes amid macro and tariff uncertainty and a new tech cycle,” said Abhishek Pathak, a research analyst at Motilal Oswal Financial Services.
Despite muted sentiment, experts suggest that rupee depreciation and the gradual integration of AI-driven services could support the sector in the medium term.
with inputs from Reuters