India's top IT services companies are expected to deliver mixed December-quarter performance, with seasonal headwinds still evident but deal execution, margin levers and guidance commentary driving differentiation between major players. Bloomberg estimates point to modest sequential revenue growth across the large-cap IT sector in Q3, alongside improvement in operating profit for some companies.

Company-Specific Expectations

Tata Consultancy Services

Bloomberg estimates for TCS suggest headline growth is masking continued pressure in constant-currency terms, reflecting the lingering impact of the BSNL ramp-down. The company's performance indicators show specific trends:

HCLTech

Estimates point to stronger sequential growth relative to peers at HCLTech, underpinned by seasonal strength in the products and platforms business. The company is expected to show margin expansion despite wage hikes, with the Street factoring in a dividend announcement.

Infosys

Bloomberg estimates suggest a steady quarter for Infosys, with limited movement in profit but an improvement in constant-currency revenue growth. Headcount is expected to remain stable, reinforcing the view that the company is prioritising execution and margin discipline over expansion.

Wipro

Estimates indicate a sequential pickup in revenue and operating profit at Wipro, aided by inorganic contribution, though margin movement is expected to remain constrained. Headcount is forecast to stay largely unchanged, while expectations of a dividend keep capital return on the agenda.

Analyst Perspectives

Growth Projections

According to Investec, Tier-1 IT firms are likely to post sequential growth of 0.8%–2.4%, with HCLTech and Wipro among those expected to perform relatively better. The brokerage expects the lower end of guidance to be raised at Infosys and HCLTech, supported by stronger deal pipelines and momentum in artificial intelligence-led engagements.

Market Conditions

Jefferies expects aggregate growth across its coverage to moderate, with margins supported by currency movements but partly offset by furloughs. Focus areas remain calendar year 2026 budgets and demand visibility, as discretionary spending recovery remains uneven.

Sector Outlook

Analysts broadly agree that the December quarter remains seasonally weak due to fewer billing days, but note that delays and deferrals have eased compared with previous years. UBS maintains a cautious stance on the sector, noting that discretionary demand has yet to show a clear recovery, though early signs of stabilisation are emerging.

Nuvama expects a stable quarter despite seasonality, with most companies delivering muted but positive sequential growth driven by deal ramp-ups. The firm sees limited change in macro conditions, suggesting management commentary is likely to remain similar to the previous quarter, while maintaining a positive medium- to long-term view on the sector.

India's information technology companies are expected to report modest but resilient third-quarter performance, with analysts pointing to easing deal delays and steady deal wins offsetting the usual seasonal slowdown. The December quarter typically represents the weakest period for IT services firms due to fewer billing days, but growth momentum this year appears stronger than previous cycles.

Sector Performance Expectations

Deal ramp-ups, improved conversion of pipelines, and fewer project deferrals are expected to support sequential growth, even as discretionary spending remains under pressure and geopolitical risks continue to weigh on sentiment. While demand recovery remains uneven across geographies and verticals, brokerages expect management commentary to turn more constructive during the December quarter.

Brokerage Outlook Summary

Major brokerages have provided detailed expectations for the IT sector's Q3 performance:

Company-Specific Projections

Among large firms, HCLTech and LTIMindtree are expected to grow faster, while Coforge and Sagility may outperform among mid-sized peers. Tier-2 companies are expected to continue outperforming, with Hexaware Technologies and Zensar Technologies as exceptions reporting sequential declines.

Preferred Picks by Brokerages

Large Caps:

• UBS prefers Infosys and HCLTech
• Investec expects relatively better growth at HCLTech and Wipro

Mid-Tier Firms:

• UBS favors Persistent Systems and Mphasis
• Investec anticipates strong performance from Persistent Systems and LTIMindtree

Margin and Growth Dynamics

Margins may see support from foreign exchange movements, though this could be partly offset by furloughs during the quarter. Growth will be impacted by December-quarter seasonality, but stronger deal wins are expected to support momentum compared with prior years. Tech Mahindra, KPIT Technologies, and Zensar Technologies may begin to see positive catalysts emerge.

Key Focus Areas

During earnings announcements, attention will center on several critical areas:

• Deal pipelines and conversion rates
• Artificial intelligence-led engagements and traction
• Budget visibility for calendar year 2026
• Demand outlook across geographies and verticals

Deal pipelines remain robust, with increasing traction in artificial intelligence-led deals. The bottom end of guidance may be raised for Infosys and HCLTech, reflecting improved business momentum. Commentary from Accenture does not yet indicate a recovery in discretionary spending, maintaining a cautious sector outlook despite emerging improvement signs.