Automotive IT Firms Navigate Uncertainty, Expect Recovery in H2FY26

Tata Technologies (

) and KPIT Technologies () are both navigating a challenging Q1FY26 amid global uncertainties, including geopolitical tensions and evolving tariff policies. Both companies have reported slower deal conversions and cautious outlooks for the early part of the fiscal year. Tata Technologies’ CEO Warren Harris noted that while Q1FY26 has been softer than expected, recent improvements in deal closures offer optimism for a stronger Q2 and full-year performance. He emphasized that despite short-term delays, the long-term shift toward electric vehicles and software-defined mobility remains intact. The company is leveraging AI to improve productivity and protect margins, having maintained gross profit margins above 18% for four consecutive years. KPIT Technologies also highlighted a similar trend in its mid-quarter business update, citing a strong pipeline but slower-than-expected deal conversions. It warned of reduced spending by clients due to budget constraints and shifting priorities, which is impacting revenue growth. However, the firm remains confident in its long-term prospects, particularly with the pending acquisition of Caresoft’s Global Engineering Solutions Business set to close by end of Q1FY26. This acquisition is expected to boost KPIT’s presence in the trucks and off-highway segment and accelerate its expansion into China. Both firms are under pressure to maintain margins as client spending remains subdued. To counter this, outsourcing more work to lower-cost locations and optimizing operations will be crucial in regaining efficiency and protecting profitability. With clarity on US policy and a return of investment momentum expected later in the year, the sector could see a revival in H2FY26.