India's large IT services companies are likely to report a muted first quarter, with growth visibility unlikely to improve meaningfully until clients shift from cost-take-out projects to larger AI-led transformation deals, according to a research report by Equirus Securities.
Demand Outlook Remains Measured Through FY27
The brokerage expects demand to stay measured through FY27 as volatile macro conditions and geopolitical uncertainties keep enterprises cautious on discretionary spending. While AI adoption is accelerating, most clients are funding it through productivity gains and vendor consolidation rather than expanding overall IT budgets. This dynamic is likely to cap revenue growth in the near term, even as the sector benefits from currency tailwinds and better margins.
Q1 Performance Expectations for Top IT Firms
For the June quarter, Equirus expects the Top-6 large IT companies to report constant-currency organic US dollar sales growth ranging from a decline of 1.7 percent to growth of 1.1 percent quarter-on-quarter. Within this, it sees Wipro IT Services near the lower end and Tech Mahindra at the upper end. On a reported basis, CC US dollar consolidated sales are expected to range from a decline of 1.1 percent to growth of 1.7 percent QoQ, with cross-currency headwinds likely to shave off another flat to 30 basis points.
Tailwinds and Margin Execution
The report points to tailwinds from a 3 percent QoQ depreciation in the average INR/US dollar spot rate, benign supply-side pressures, and continued cost optimisation and productivity gains. As a result, EBIT margin execution is expected to remain strong for most large caps in the first quarter of FY27.
Guidance Tweaks Expected
On guidance, Equirus expects some tweaks. It sees Infosys guiding for 2.8-4.3 percent CC US dollar sales growth in FY27 on a consolidated basis excluding the merger and acquisition of Vertex, and 1.5-3.0 percent excluding both Optimum and Vertex, versus the current 1.5-3.5 percent guidance. EBIT margin guidance of 20-22 percent is likely to be retained. For HCL Tech, the brokerage expects no change to the 1.5-4.5 percent CC US dollar services growth guidance and 17.5-18.5 percent EBIT margin band. Wipro is expected to guide for a CC US dollar IT Services decline of 2.0 percent to flat QoQ for the second quarter of FY27.
AI-Led Investments and Deal Trends
Equirus noted that AI-led transformational investments are being funded by cost savings rather than budget expansion, and deal total contract value (TCV) trends may be mixed QoQ. The key monitorable will be management commentary on the pipeline for transformation deals and growth outlook beyond the first quarter of FY27.
Valuations and Multiples
Valuations have corrected materially in calendar year 2026 year-to-date, pushing free cash flow yields higher, but Equirus believes multiples may stay measured unless there is consistent improvement in growth visibility beyond this quarter.
Role of IT Providers in Enterprise AI
The brokerage added that IT services providers will remain critical in the enterprise AI adoption phase, particularly for brownfield work involving legacy modernisation, data engineering, cloud adoption and cybersecurity. It expects large client AI architectures to be complex, with a hybrid mix of large language models, small language models and agents, increasing the need for system integrator support.
