- IT Firms Brace for Tepid Q4 Earnings

India’s IT services sector is expected to report weak revenue performance in Q4FY26, as client caution on discretionary technology spending, uncertainties around artificial intelligence (AI) adoption, and geopolitical tensions in West Asia weigh on demand. Aggregate data under Jefferies’ coverage suggests flat sequential constant currency revenue growth, underscoring muted momentum despite resilience in select verticals. Demand Trends - Discretionary spending: Clients remain cautious, delaying projects and tightening budgets. - AI adoption: Uncertainty around business models and monetization is slowing decision-making. - Geopolitical risks: West Asia conflict adds volatility, impacting global IT budgets. Vertical Performance - Banking, Financial Services & Insurance (BFSI): continues to show positive momentum, supporting overall growth. - Manufacturing: demand remains subdued, reflecting global industrial slowdown. - M&A activity: weaker deal flow limits large transformation opportunities. Company Outlooks - TCS, Infosys, HCL Tech, Tech Mahindra: expected to report muted sequential growth, with margin pressures from wage hikes and currency volatility. - L&T Technology Services, Coforge, Persistent Systems, Hexaware: niche players may show relative resilience, but overall sector growth remains constrained. Revenue Trends - Sequential constant currency revenue growth (Jefferies coverage): - Q1FY26: –1% - Q2FY26: +2% - Q3FY26: +2% - Q4FY26E: 0% Outlook While BFSI provides some cushion, overall demand remains tepid, with growth visibility clouded by client caution and macro risks. Execution on AI-led opportunities and cost discipline will be critical for sustaining margins. Near-term earnings are likely to remain muted, with investors focusing on deal wins and commentary on FY27 demand recovery.