Hopes for a swift rebound in India's information technology services sector have been pushed further down the line, with the December quarter of fiscal year 2026 expected to deliver a mixed and muted performance from the country's top firms. Geopolitical tensions and concerns over potential tariffs in key markets like the US and Europe have forced Fortune 500 clients to remain cautious, delaying the revival of non-essential technology spending that the industry eagerly awaits.
Brokerages Paint a Cautious Picture for Q3
Analyses from at least four prominent brokerages, including Motilal Oswal Financial Services, Axis Capital, ICICI Securities, and Deven Choksey Research, indicate that client wariness and broader macroeconomic worries will cloud the earnings of India's top ten IT services companies for the quarter ending December 2025. This signals a longer-than-anticipated wait for a meaningful demand pick-up, contradicting predictions from just three months prior that foresaw a revival.
The estimates reveal a tiered performance among the industry's Big Five. The top three players—Tata Consultancy Services Ltd (TCS), Infosys Ltd, and HCL Technologies Ltd—are projected to report sequential revenue growth ranging from a marginal 0.1% to 3.6%. The growth is expected to be led by HCLTech, the third-largest firm. In contrast, the fourth and fifth largest companies, Wipro Ltd and Tech Mahindra Ltd, might report a revenue decline of up to 0.3% and 1.2%, respectively, or at best, a modest growth of 2.3% and 1.2%.
This quarter marks the third consecutive period where brokerages have forecasted sequential growth below 4%, underscoring a consistently tempered outlook for the sector.
Company-Specific Drivers and Seasonal Headwinds
Axis Capital noted in a report dated 2 January that the quarter may send out "mixed signals," with company-specific factors driving outcomes. They indicated that TCS, Wipro, and HCL Tech would see growth influenced by individual deal flows, while Infosys and Tech Mahindra could be slowed by seasonal furloughs, where fewer employees are available to work due to holidays.
The December quarter is traditionally weak for IT companies because of holidays and fewer working days, leading to lower billings. This year, the seasonal weakness is compounded by global geopolitical uncertainty. However, not all companies are equally affected. All four brokerages expect HCLTech to outperform its peers, forecasting growth between 2% and 3.6% quarter-on-quarter.
ICICI Securities analysts attributed this resilience to positive seasonality in HCLTech's software product business, which contributes about 9% of its revenue. The company's 2018 acquisition of seven software products from IBM for $1.8 billion has created a revenue stream that peaks in the third quarter, helping offset broader industry fluctuations.
Strategic Shifts and Mid-Cap Outperformance
Facing a challenging demand environment, IT majors are pivoting strategically towards acquisitions and artificial intelligence (AI) investments. In a significant move, TCS announced a $6.5 billion investment over six years to build data centres in October 2025. Similarly, Coforge Ltd has announced a $2.4 billion buyout of US-based Encora.
Interestingly, Wipro, which has seen revenue decline over the past two years, is expected by three of the four brokerages to grow at the second-fastest rate among the top five in Q3. This optimism is largely based on the ramp-up of its $375 million Harman acquisition and a major $650 million, 10-year deal with UK insurer Phoenix.
While the giants navigate headwinds, mid-sized IT services firms with annual revenues between $1 billion and $5 billion are poised to outperform their larger counterparts for the third quarter in a row. Persistent Systems is expected to lead this pack with a 3.5% revenue growth, driven by momentum in digital transformation and AI-led projects across sectors like banking and healthcare.
The earnings season will commence with TCS and HCLTech announcing results on 12 January 2026, followed by Infosys on 14 January and Tech Mahindra on 16 January. Wipro is yet to announce its date.
Most analysts now believe a substantial demand recovery is deferred to the next fiscal year (FY27). HDFC Securities analysts stated that companies are prioritizing strategic investments in next-generation technologies like AI, which are expected to drive future deal wins and growth once the planning cycles reset and budgets firm up in the coming year.
