Indian IT sector to witness soft growth in Q1 despite seasonal strength: Report

New Delhi, July 8 (IANS) The Indian IT services sector is expected to experience a soft quarter growth (Q1FY26) despite the seasonal strength, according to a report released on Tuesday.

IT companies’ earnings are expected to be mixed across the board with a very soft quarter for ER&D services companies on a quarter-on-quarter (QoQ) basis, Equirus Securities said in its report.

The report is being prepared considering Infosys and Tech Mahindra among large-cap IT companies, and Zensar, Mphasis, and KPIT eClerx among mid-cap companies on a relative basis.

The financial service firm sees some sort of modification in Infosys’s FY26 sales growth guidance and soft growth in the top six large-cap IT companies.

"Infosys to guide for 1.0-3.25 per CC growth in US$ sales to largely factor incremental inorganic growth contribution of c. 0.4 per cent (earlier growth guidance of 0-3 per cent) with no change in its EBITM guidance of 20-22 per cent for FY26E," the report said.

"The top 6 large caps to register QoQ growth of (-) 2.6 per cent to (+) 1.4 per cent in US$ Sales in CC terms in 1Q1 FY26E. Equirus Securities expects high cross-currency tailwinds QoQ across top 6 large caps in the range of 120-230 bps QoQ," it added.

However, the firm expects a healthy sales performance from some of the midcap IT/BPO services companies.

The financial research firm expects demand commentary to remain cautious. However, it believes that vendors are witnessing better demand tailwinds in BFSI.

As per the report, TCS's US$ revenue is expected to dip QoQ by 0.4 per cent in CC terms. Tepid growth is largely due to the expected ramp-down in the BSNL deal and some softness in sales growth in international markets.

Equirus expects Wipro US$ sales to dip by 2.6 per cent QoQ in CC terms, while HCL Tech US$ revenue growth is expected to be 1.4 per cent QoQ.

Tech Mahindra's US$ sales to dip 0.8 per cent QoQ sales in CC terms considering seasonal softness in Comviva and continuing softness in demand from some of the hi-tech clients, according to the report.

--IANS

aps/na