The Indian IT sector is bracing for a cautious earnings season, following subdued performances from business giants TCS and Accenture. Analysts extensively count on the January–March quarter to replicate muted progress throughout the board, elevating contemporary issues in regards to the sustainability of the sector’s momentum amid world financial uncertainty.
TCS, India’s largest IT providers supplier, set the tone on Thursday with weaker-than-expected This fall outcomes. Each income and internet revenue fell in need of market projections. Nonetheless, in a constructive improvement, the corporate reported record-high deal wins—an indication that long-term demand may nonetheless be intact regardless of near-term challenges.
The corporate additionally talked about delaying wage hikes this 12 months. “Due to the unsure setting, we are going to take a name on wage hikes throughout the 12 months. It may be any time, relying on enterprise,” Milind Lakkad, chief HR officer at TCS, stated throughout the earnings name.
This follows carefully on the heels of Accenture’s Q2 FY25 outcomes, which revealed $16.7 billion in income for the quarter ending February 28. Whereas the consulting big marginally raised its annual income progress forecast to a spread of 5% to 7% (up from 4% to 7%), it nonetheless fell in need of analysts’ expectations, which had anticipated a 5.7% progress.
In a major cost-cutting stance, US secretary of protection, Pete Hegseth, reportedly issued a memo not too long ago, ordering the termination of quite a few consulting contracts associated to info expertise and different “non-essential actions”. The directive consists of the cancellation of roughly $1.5 billion in contracts beforehand awarded to main companies corresponding to Deloitte, Accenture, and Booz Allen Hamilton.
The memo additional instructed the Pentagon’s chief info officer, Katie Arrington, in coordination with Elon Musk’s division of presidency effectivity (DOGE), to develop a plan inside 30 days to internalise IT consulting and administration providers, transferring these obligations to the division’s civilian workforce.
In India, IT deal bookings have remained lukewarm, reinforcing issues that progress could proceed to taper off within the close to time period. Because of this, analysts have revised their forecasts. They’re now anticipating modest income will increase between simply 1% and 5% for the March quarter throughout main IT companies. This has sparked a broader query: is Indian IT coming into a part of extended slowdown?
In the meantime, business specialists have cautioned towards sounding the alarm too quickly. Talking with AIM, Viswanathan KS, former VP of business initiatives at Nasscom and impartial digital transformation advisor, supplied a extra measured perspective.
“Enterprises are more and more demanding worth reductions as they scale up their use of AI and automation instruments. On the flip aspect, a number of mid-market firms are accelerating their digital efforts, opening up new progress avenues,” he defined.
He referred to it as a brief blip—very similar to the rapid aftermath of COVID-19—somewhat than a long-term structural concern.
Whereas short-term headwinds corresponding to geopolitical uncertainty, price pressures, and shifting consumer priorities undeniably influence efficiency, business insiders imagine that the long-term fundamentals of Indian IT stay intact. The approaching quarters will likely be essential in figuring out whether or not the sector can efficiently pivot and faucet into rising digital demand, or if the present sluggishness indicators a extra profound transformation within the world IT providers panorama.
Why are Mid-Tier IT Corporations Main the Race?
Prashant Shukla, vp at Everest Group, identified that mid-tier service suppliers have been constantly outperforming the IT providers business common.
In distinction to their bigger counterparts, these companies are anticipated to report comparatively robust progress. These firms are benefiting from their extra nimble operations and their capacity to deal with area of interest markets, which permits them to cater to particular consumer wants extra successfully.
Many of those mid-sized suppliers are intensifying their deal with present shoppers, reaping the advantages of base account progress. Furthermore, there are cases the place these gamers are being most popular over bigger incumbents, because of their better flexibility and proactive orchestration of expertise, operate, area, and enterprise to unravel particular consumer issues.
Trump’s Tariffs Brewing Uncertainty
The continued commerce tensions between the US and different areas are contributing to broader financial instability, impacting demand for IT providers—notably throughout the banking, monetary providers, and insurance coverage (BFSI) sectors. On condition that a good portion of income tied to North America, these tariffs are more likely to weigh on future income projections for Indian IT companies.
However, throughout the This fall earnings name TCS highlighted that the corporate’s worldwide enterprise, which is greater than 90% of its total enterprise, grew 0.6% sequentially.
Rajesh Ranjan, managing associate at Everest Group, believes that Indian IT will stay unaffected as they’ve already strengthened their presence within the US throughout the earlier Trump administration in response to comparable points.
Because of this, he added that the reliance on H1B visas by Indian IT has lowered, having constructed the aptitude to rent expertise domestically within the US and utilising technological improvements.
In accordance with the Nationwide Basis for American Coverage (NFAP), Indian IT companies have lowered H-1B visa use by 56% over the past decade. Infosys’ visa functions dropped by 21% between FY15 and FY23, whereas TCS noticed a 75% decline, The Financial Occasions reported. Wipro additionally reported a 69% lower in accepted H-1B petitions throughout the identical interval.
In the meantime, in one other report, NFAP revealed that Cognizant had the second most H-1B petitions in FY 2024 accepted for preliminary employment with 2,837, adopted by Infosys (2,504), TCS (1,452), IBM (1,348), Microsoft (1,264), HCL America (1,248), Google (1,058), Capgemini (1,041) and Meta Platforms (920) in FY 2024.
Generative AI to Lead the Subsequent Progress Part
As conventional progress drivers face challenges, GenAI has emerged as a key focus for the Indian IT sector’s future. The success of world gamers—highlighted by Accenture’s generative AI bookings reaching $1.4 billion in Q2 FY25, up from $1.2 billion within the final quarter—has positioned strain on Indian companies to maintain tempo with these developments.
In the course of the earnings name of This fall, Okay Krithivasan, CEO and MD at TCS, revealed that the corporate is investing in an agentic AI kind, with over 150 options throughout finance and accounting, provide chain, sourcing and procurement, HR and buyer expertise to assist prospects within the journey in the direction of autonomous world enterprise providers.
Notably, TCS noticed shoppers considerably scale their investments in AI and GenAI throughout FY25, driving robust progress throughout its GenAI and agentic AI providers and options.
However, Wipro reported in its FY2025 Q2 earnings that its massive offers pipeline can also be benefiting from its GenAI initiatives, contributing to a formidable $1.5 billion in massive offers—the best in 10 quarters.
Analysts forecast that whereas the rapid advantages of AI could also be concentrated amongst top-tier shoppers, the adoption of AI is predicted to speed up throughout the business.
FY26 Steerage More likely to Be Higher
Krithivasan talked about that they haven’t seen any main undertaking cancellations throughout the quarter. Nonetheless, he acknowledged a number of ramp-downs in sure areas, together with some delays in decision-making processes.
Nonetheless, the corporate believes that the uncertainty will die down within the subsequent few months.
Sid Tipnis, expertise, media and telecommunications consulting chief at Deloitte, informed AIM that FY25/26 is predicted to see AI, GenAI and agentic AI-led innovation strikes from experimentation to better deployment throughout enterprise processes and finish consumer expertise. “IT managed service preparations will likely be anticipated to embrace these adjustments and go on the effectivity to organisations. Consequently, this section of enterprise is more likely to count on strain on Whole Contract Worth (TCV), which could possibly be within the vary of 5%–10%.”
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