For IT companies, will 2026 be a year of healing?

Revenue visibility for Q4 remains bleak amid prevailing client caution and global macro-economic uncertainty. Plus, the latest cue–global technology giant Accenture's quarter ending November (or Q1FY26) results–is hardly encouraging.

Accenture competes with tier-1 IT companies in the managed services (outsourcing) business, so it is often seen as an indicator of future performance. Its Q1FY26 constant currency revenue grew 5% year-on-year, at the upper-end of its 1-5% guidance band and beating analysts’ estimates.

Growth was largely led by the financial services sector. Managed services continued to outperform the consulting business. Deal wins saw a decent 10% year-on-year growth with bookings at $20.9 billion. Still, it maintained its FY26 growth guidance at 2-5% (this excludes an estimated 1% impact from its US federal business).

The Accenture management said, overall, the demand environment has not meaningfully changed —neither positively nor negatively and clients are prioritizing large, strategic transformation programs over discretionary initiatives.

“Despite Q1 beat, unchanged guidance suggests a weaker H2 versus H1, which coincides with Indian IT’s H1. This is a negative read-across for street hopes of a sharp rebound," said a 19 December Ambit Capital report.

Considering Accenture’s FY26 guidance and macro commentary, Ambit expects at best a moderate revenue recovery in FY27. Although strength in the banking financial services and insurance (BFSI) sector is a consolation, Accenture's continued outperformance on growth versus top-four IT and sharper scale-up in Gen AI is a worry, it added. Gen AI bookings were strong at $2.2 billion, up 83% year-on-year.

“Accenture’s growth in AI and cloud reinforces the view that Indian IT firms will need to accelerate their AI-driven transformation offerings to remain competitive. With cost optimization driving demand, expect Indian IT firms to push managed services deals and cost take-out projects, especially in this volatile period for technology companies globally," said a Nirmal Bang Institutional Equities report.

Thus, a key theme in 2026 will be the progress on Gen AI. The Street will track the pace at which clients focus on Gen AI shifts from experimentation to readiness and its impact on deal conversions.

Lingering worries

On the flipside, there have been worries about the deflationary impact of AI technologies on the revenues of IT companies. Indian companies are gearing up on this front with increased investments, but tackling pricing pressures and protecting margins will be crucial.

Meanwhile, the December quarter (Q3) is seasonally weak for Indian IT companies due to furloughs/lower working days, so clarity on demand scenario may not emerge immediately.

While valuations of IT stocks have cooled off, re-rating triggers are missing. According to BNP Paribas Securities India, deal-win announcements in November were muted and declined further month-on-month basis.

“The three-month rolling sum of deal signings, a healthy one-quarter lead indicator of deal total contract value, declined further month-on-month," it said.

Deal win announcements were dominated by Tata Consultancy Services (six), followed by Cognizant, Wipro, LTIMindtree, DXC Technology and Atos (one each).

Deal announcements were concentrated in Europe and do not show any year-end budget flush so far, cautioned BNP Paribas. Usually, decisive signals about client behaviour tend to emerge in March and April when client budgets for the next financial year are reset, especially in the US.