IT Sector Q2 FY27 Outlook Faces Growth Pressure

Indian IT Sector: The Q2 FY27 earnings season is expected to remain focused on muted organic demand, guidance changes and the growing contribution from acquisitions. Infosys could revise its FY27 constant-currency revenue growth guidance below the current 1.5%–3.0% range, while HCL Technologies may narrow its organic growth outlook to around 2.0%–3.0%. At the same time, acquisitions are providing a meaningful cushion to reported growth. Coforge could receive around 820 bps of inorganic revenue contribution from Encora, while HCL Technologies could get around 110 bps from recent acquisitions. Wipro and Hexaware are also expected to receive smaller inorganic contributions. My View: The key issue for the sector is the gap between reported growth and underlying organic growth. Acquisitions can support headline revenue, but they do not fully address weak demand in existing businesses. A second concern is AI-led productivity. Efficiency gains could create pricing and revenue pressure on existing contracts unless new GenAI implementation demand grows fast enough to offset the impact. Q2 commentary on deal wins, discretionary spending and FY27 guidance will therefore matter more than headline quarterly revenue growth. What to watch: Watch organic constant-currency growth, FY27 guidance, large deal bookings, discretionary technology spending and the pace at which GenAI demand offsets AI-driven revenue pressure. Stance: IT SECTOR – CAUTIOUS