Why India’s IT slowdown is proving hard to shake

Even as earnings surprises lifted sentiment in the October-December period, four of India’s five largest IT services companies are now heading into the final quarter of FY26 (January-March) with weaker full-year trajectories than last year, underscoring how weak demand visibility remains for the country’s biggest software exporters.

Tata Consultancy Services (TCS) is at risk of a rare annual revenue decline, Infosys Ltd and HCL Technologies Ltd (HCLTech) are staring at slower growth than last year, and Wipro Ltd is bracing for a third consecutive year of contraction. Only Tech Mahindra Ltd is expected to buck the trend. Together, the outlook points to a third straight year of sluggish growth for India’s IT majors, even as automation, artificial intelligence (AI)-led pricing pressure and tariff uncertainty cloud demand visibility.

The disconnect between quarterly beats and full-year deterioration has begun to trouble analysts. Lacklustre guidance from the top four has prompted at least one brokerage to question whether the country’s largest IT service providers, together accounting for nearly a third of India’s $283 billion IT industry, are genuinely on the cusp of a recovery, despite cautious optimism from management teams.

“FY27 is going to be better than FY26. Modestly. Likely fourth year of slow revenue growth. Slow is the (old/new) normal," said Bank of Baroda Capital Markets analysts Girish Pai and Lopa Notaria, in a note dated 12 January.

“We see tier-1 growth to remain at low-single-digit level for FY26 and ‘eating the tariff’ may lead to an adverse impact on FY27," the analysts added.

TCS: A five-year growth test

At the top of the heap, TCS faces its stiffest annual test in years. The Mumbai-based company ended the first nine months of FY26 with $22.4 billion in revenue, implying it needs $7.78 billion in the January-March quarter to match last year’s $30.18 billion.

That would require sequential growth of 3.65%, its fastest pace in five years. Three brokerages now expect TCS to end FY26 with a revenue decline, which would be its first since listing in 2004.

“TCS grew better than Infosys in FY25; however, FY26 will likely be a ‘decline’ year for TCS, and the company may underperform its other large peers. We see only a moderate improvement in margins as TCS invests to improve growth," said HSBC analysts Yogesh Aggarwal, Prateek Maheshwari, and Sagar Desai, in a note dated 1 January.

Analysts attribute the pressure to weak demand visibility, a thin pipeline of large deals, and client slippages to rivals. Management, too, has turned more guarded compared with October, when it had sounded confident about international markets, which account for 94% of revenue.

“We did tell in the past that our international market, we will continue delivering a higher growth. Now that we only have one quarter left, but it continues to be our aspiration that we would make every effort. We saw demand slowly picking up in Q2 that continued in Q3. We are taking every step to ensure that we grow better than FY25 in FY26 in the international market," said K Krithivasan, chief executive of TCS, during the company’s post-earnings analyst call on 12 January.

Infosys, HCLTech: Growing, but slower

Second-largest Infosys ended the first nine months with $15.1 billion in revenue. To miss last year’s $19.28 billion, it would need a decline in the fourth quarter, a scenario that is not unusual, given that the company has reported sequential fourth-quarter declines of more than 2% in each of the past three years. Even so, growth is expected to slow.

Management has guided for 3-3.5% revenue growth in constant currency terms for FY26. It ended last year with a constant currency growth of 4.2%. Constant currency (CC) excludes the impact of exchange-rate movements.

Third-largest HCLTech, which grew 4.7% last year, has guided for 4-4.5% growth in constant currency terms this fiscal year. While it is still expected to outperform most large peers, the tone from management has been cautious.

“While uncertainties persist in the global market leading to slow spending growth on traditional offerings, the fundamental demand for technology as a driver for business transformation remains structurally intact," said C Vijayakumar, chief executive of HCLTech, during the company’s post-earnings call on 12 January.

HCLTech ended the first nine months with $10.98 billion in revenue and would need a double-digit fourth-quarter decline to miss last year’s $13.84 billion.

Wipro: Three years of decline loom

If HCLTech offers relative resilience, Wipro remains the sector’s laggard. The fourth-largest IT services firm is heading toward a third consecutive year of revenue decline. It reported $7.83 billion in revenue for the first nine months and needs 1.86% sequential growth in the March quarter to match last year, a pace that would mark its strongest fourth quarter in four years.

Management has guided for fourth-quarter revenue of $2.64-$2.69 billion, which implies a decline at the lower end of the range. At least one brokerage expects its organic revenue to decline and muted growth at best.

“We think near-term revenue visibility will remain limited, as fewer working days in 4Q and delayed ramp-ups together weigh on growth. Given this, we now build in an organic revenue decline of 0.4% and overall revenue growth of 0.5% YoY (year-on-year) CC in FY26," said Motilal Oswal Financial Services analysts Abhishek Pathak, Keval Bhagat, and Tushar Dhonde, in a note dated 17 January.

Investors reacted sharply. Wipro shares closed 8.2% lower on Monday, the first trading day after earnings, at ₹245.5, with analysts citing low growth visibility and delayed ramp-ups of large deals.

Tech Mahindra: The lone bright spot

Tech Mahindra stands apart. The fifth-largest player is the only one among the top five expected to improve on last year. It ended April-December 2025 with $4.76 billion in revenue and needs $1.5 billion in the final quarter to match last year’s total. It would take a roughly 7% revenue decline in Q4 for the company to fall short.

While Tech Mahindra does not offer formal revenue guidance, management has indicated expectations of higher growth.

The bigger worry: AI-led deflation

Beyond individual company performance, analysts see a deeper structural risk emerging from automation and AI adoption.

“We fear scaled AI enterprise adoption if it happens will be more deflationary than it was in 2025. We think savings from such an AI adoption may go to hyper scalers who will try to extract more from enterprises to fund their heightened AI Capex," said the Bank of Baroda Capital Markets analysts.

They added that “Trump’s multiple proposals to address affordability crisis in the US ahead of the mid-terms in November 2026 will be the key monitorable in 2026."

For an industry long accustomed to dependable mid-single-digit growth, quarterly beats are offering limited reassurance, as demand visibility remains weak and growth trajectories continue to soften.