The Indian IT sector is bracing for a cautious earnings season, following subdued performances from trade giants TCS and Accenture. Analysts broadly count on the January–March quarter to mirror muted progress throughout the board, elevating contemporary considerations concerning the sustainability of the sector’s momentum amid world financial uncertainty.
TCS, India’s largest IT companies supplier, set the tone on Thursday with weaker-than-expected This autumn outcomes. Each income and web revenue fell wanting market projections. Nevertheless, in a optimistic 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 atmosphere, we are going to take a name on wage hikes through the 12 months. It may be any time, relying on enterprise,” Milind Lakkad, chief HR officer at TCS, mentioned through the earnings name.
This follows intently 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 large marginally raised its annual income progress forecast to a spread of 5% to 7% (up from 4% to 7%), it nonetheless fell wanting 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 lately, ordering the termination of quite a few consulting contracts associated to data know-how and different “non-essential actions”. The directive contains the cancellation of roughly $1.5 billion in contracts beforehand awarded to main companies similar to Deloitte, Accenture, and Booz Allen Hamilton.
The memo additional instructed the Pentagon’s chief data 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 companies, transferring these tasks to the division’s civilian workforce.
In India, IT deal bookings have remained lukewarm, reinforcing considerations that progress could proceed to taper off within the close to time period. In consequence, 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 getting into a section of extended slowdown?
In the meantime, trade consultants have cautioned in opposition to sounding the alarm too quickly. Talking with AIM, Viswanathan KS, former VP of trade initiatives at Nasscom and unbiased 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 corporations are accelerating their digital efforts, opening up new progress avenues,” he defined.
He referred to it as a brief blip—very like the rapid aftermath of COVID-19—fairly than a long-term structural situation.
Whereas short-term headwinds similar to geopolitical uncertainty, price pressures, and shifting shopper priorities undeniably affect efficiency, trade insiders imagine that the long-term fundamentals of Indian IT stay intact. The approaching quarters shall be essential in figuring out whether or not the sector can efficiently pivot and faucet into rising digital demand, or if the present sluggishness alerts a extra profound transformation within the world IT companies panorama.
Why are Mid-Tier IT Companies Main the Race?
Prashant Shukla, vice chairman at Everest Group, identified that mid-tier service suppliers have been persistently outperforming the IT companies trade common.
In distinction to their bigger counterparts, these companies are anticipated to report comparatively sturdy progress. These corporations are benefiting from their extra nimble operations and their means to give attention to area of interest markets, which permits them to cater to particular shopper wants extra successfully.
Many of those mid-sized suppliers are intensifying their give attention to present shoppers, reaping the advantages of base account progress. Furthermore, there are cases the place these gamers are being most well-liked over bigger incumbents, because of their higher flexibility and proactive orchestration of know-how, perform, area, and enterprise to resolve particular shopper 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 companies—notably throughout the banking, monetary companies, and insurance coverage (BFSI) sectors. On condition that a good portion of income tied to North America, these tariffs are prone to weigh on future income projections for Indian IT companies.
However, through the This autumn earnings name TCS highlighted that the corporate’s worldwide enterprise, which is greater than 90% of its general enterprise, grew 0.6% sequentially.
Rajesh Ranjan, managing companion at Everest Group, believes that Indian IT will stay unaffected as they’ve already strengthened their presence within the US through the earlier Trump administration in response to comparable points.
In consequence, he added that the reliance on H1B visas by Indian IT has decreased, having constructed the aptitude to rent expertise regionally within the US and utilising technological improvements.
Based on the Nationwide Basis for American Coverage (NFAP), Indian IT companies have decreased 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 Development Section
As conventional progress drivers face challenges, GenAI has emerged as a key focus for the Indian IT sector’s future. The success of worldwide 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 stress on Indian companies to maintain tempo with these developments.
Throughout the earnings name of This autumn, Ok Krithivasan, CEO and MD at TCS, revealed that the corporate is investing in an agentic AI type, with over 150 options throughout finance and accounting, provide chain, sourcing and procurement, HR and buyer expertise to assist prospects within the journey in direction of autonomous world enterprise companies.
Notably, TCS noticed shoppers considerably scale their investments in AI and GenAI throughout FY25, driving sturdy progress throughout its GenAI and agentic AI companies and options.
However, Wipro reported in its FY2025 Q2 earnings that its giant offers pipeline can be benefiting from its GenAI initiatives, contributing to a formidable $1.5 billion in giant 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 anticipated to speed up throughout the trade.
FY26 Steering More likely to Be Higher
Krithivasan talked about that they haven’t seen any main venture cancellations through the quarter. Nevertheless, he acknowledged just a few ramp-downs in sure areas, together with some delays in decision-making processes.
Nevertheless, the corporate believes that the uncertainty will die down within the subsequent few months.
Sid Tipnis, know-how, media and telecommunications consulting chief at Deloitte, instructed AIM that FY25/26 is anticipated to see AI, GenAI and agentic AI-led innovation strikes from experimentation to higher deployment throughout enterprise processes and finish consumer expertise. “IT managed service preparations shall be anticipated to embrace these adjustments and cross on the effectivity to organisations. Consequently, this section of enterprise is prone to count on stress on Complete Contract Worth (TCV), which may very well be within the vary of 5%–10%.”
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