Top IT companies brace for a damp Q1 on muted deal momentum

Revenue growth for top-tier companies in India’s $254-billion IT industry is anticipated to be nil-to-3% within the first quarter of the present fiscal by varied analysts. General sentiment stays subdued, regardless of the non permanent US pause on tariffs in addition to beneficial bilateral agreements between the US and nations just like the UK.

Whilst geopolitical sentiment is enhancing, purchasers are “cautiously optimistic” and non-essential tech budgets stay below strain with stories of muted deal momentum, abrupt mission pauses and ramp downs, analysts stated. Some nonetheless, level to sentiment recovering a bit at the same time as a full-fledged restoration shouldn’t be in sight.

“We’re nonetheless seeing abrupt mission pauses and ramp-downs in pockets, as clients proceed to be involved in regards to the stability and permanence of the commerce offers which were introduced,” stated Nitin Bhatt, expertise sector chief, EY India.

Boardroom discussions proceed to stay cautious concerning IT investments, with spends usually being diverted in the direction of self-funding and excessive ROI initiatives within the areas of operational effectivity and price optimisation, he added.

“There was some easing of the general warning because the revised commerce settlement with China, however an excessive amount of uncertainty prevails as the specter of tariffs stays and the present scenario stays non permanent,” stated Phil Fersht, CEO of HFS Analysis.

Some enterprises are accelerating offers earlier than they hit funds freezes, whereas others have already pulled again spending and are slowing down spending choices till the scenario clears, Fersht stated. There may be an elevated give attention to investing in AI in areas the place prices will be shortly decreased and competitiveness improved.

Income progress is anticipated to stay muted for the remainder of the yr at 2-3% at greatest whereas margins stay steady, HFS estimated. Income progress in Q1 FY26 is anticipated to be largely flat for tier-1 companies, as per InCred Capital.

The previous quarter had already witnessed slowing progress as corporations reported deal cancellations and pauses in tech spends starting March.

Within the January-March quarter, revenues of all three massive gamers confirmed negative-to-marginally optimistic progress sequentially. For Tata Consultancy Services, revenues had been nearly flat and grew 0.4% sequentially, whereas for Wipro it grew 0.8%. Whereas for Infosys, it declined by 2.01%.

On the time of macro churn, Infosys guided for a 0-3% progress in full yr 2026 revenues, whereas Wipro guided for a 1.5-3.5% fall in income within the ongoing first quarter of FY26 in fixed forex phrases. TCS doesn’t give steering.

Chief’s of IT companies had cautioned that tariffs have led purchasers to pause some current initiatives, rethink main tech spending and at the moment are seeking to eke out financial savings from ongoing engagements. “In March, there have been uncertainties, together with some round deal closures and delays in determination making,” Okay Krithivasan, CEO and MD of TCS stated at a submit earnings name final month.

The US just lately diminished tariffs towards geopolitical rival China from 145% to 30% for 90 days and inked a free commerce settlement (FTA) with the UK, reflecting an easing of tensions. A commerce deal can be within the works with India, which just lately signed an FTA with the UK as nicely.

Bhatt famous that the affect throughout service supplier cohorts appears to be uneven: agile, mid-tier gamers are gaining floor by delivering sharper worth and capturing offers that historically went to tier-1 companies. This shift appears to be contributing to extra measured progress outlooks amongst bigger incumbents.