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Indian IT Firms Face Another Muted Quarter Amid Uncertainty
Indian technology companies may have a slow three months from July to September.
This period is usually stronger, but clients are being careful and spending less on optional projects.
Analysts also say new contracts are not growing quickly.
Some companies may get a boost from acquisitions.
A weaker rupee and operating efficiencies could help make up for higher wages.
But customers are negotiating lower prices, partly because artificial intelligence can help complete work more efficiently.
Companies say using generative AI directly in complex, highly regulated businesses is still difficult, so technology service providers remain important.
Analysts expect earnings to be softer than in the previous quarter, which may keep investors cautious.
Global market pressures are also weighing on Indian stocks.
Analysts expect Indian IT companies to report muted July–September results despite the quarter typically being seasonally strong.
Soft deal wins, cautious client decisions and reduced discretionary spending are weighing on growth.
HDFC Securities estimates tier-one firms’ Q2 FY27 growth at -0.4% to +2.0% quarter-on-quarter in constant currency, and mid-tier growth at +0.6% to +6.3%, partly helped by acquisitions.
Rupee depreciation, operational efficiencies and high utilisation may offset wage increases, while AI-related pricing pressure and deflation concerns persist.
Analysts say global bond-market turmoil, stronger crude prices and heavy foreign selling are adding pressure to Indian equities.
- Who
- Indian IT companies and analysts, including HDFC Securities.
- What
- The sector is expected to report muted July–September results, with cautious client spending and pricing pressure limiting growth.
- Where
- India.
- When
- The July–September quarter, identified as Q2 FY27 in the HDFC Securities estimate.
- Why
- Soft deal wins, cautious client decisions, reduced discretionary spending, macroeconomic uncertainty and AI-related pricing pressure are weighing on the sector.
Analysts’ concerns
Industry’s stated view
AI and sector growth
Analysts’ concerns
Analysts say AI-led productivity pass-through is adding pricing pressure, and estimate a 6–7% deflation impact; conversion of AI-centric deals remains slow.
Industry’s stated view
Indian IT companies say direct generative AI deployment is difficult in complex, regulated legacy environments, keeping systems-integration vendors important.
Earnings outlook
Analysts’ concerns
Analysts expect softer Q2 earnings, fragile sentiment and a recovery dependent on the second half of FY27.
Industry’s stated view
The article reports companies’ view that systems-integration providers remain critical, but gives no company forecast that directly counters the analysts’ earnings outlook.
Key facts
- Quarter covered
- July–September; referred to as Q2 FY27 in the estimate.
- Tier-one growth estimate
- -0.4% to +2.0% quarter-on-quarter in constant currency.
- Mid-tier growth estimate
- +0.6% to +6.3%, partly aided by acquisitions.
- Expected AI-related deflation impact
- 6–7%, according to the article.
- Possible offsets to wage hikes
- Rupee depreciation, operational efficiencies and elevated utilisation.
- Other pressures on Indian equities
- A record global bond rout, renewed crude strength and the heaviest foreign selling in six months, according to analysts.
Quotes
HDFC Securities note
An analyst note from HDFC Securities estimating quarterly growth for Indian IT companies.
“Q2 FY27 (estimated) tier-1 growth is projected at -0.4 per cent to +2.0 per cent QoQ CC and mid-tier companies ranging from +0.6 per cent to +6.3 per cent, partly aided by acquisitions.”
thehansindia.com










