Muted Demand, U.S. Uncertainty Weigh on Indian IT Firms Ahead of Q3 Earnings
India’s leading information technology companies are expected to report another subdued quarter, as weak demand from the United States and holiday-related client shutdowns continue to curb technology spending. According to nine brokerages, the top six Indian IT firms by revenue are likely to post an average year-on-year revenue growth of around 4% and profit growth of about 5% for the December quarter, slower than the 6.5% revenue growth seen in the September quarter. The prolonged softness reflects ongoing macroeconomic caution among global clients, particularly in the U.S., which remains the largest revenue contributor for the sector.
The broader $283 billion Indian IT industry continues to grapple with multiple headwinds, including uncertainty over U.S. tariffs, concerns around proposed $100,000 visa fees, and subdued enterprise spending amid fears of a slowdown in the world’s largest economy. Although global bellwether Accenture recently beat expectations on AI-led demand, its unchanged growth outlook highlights the cautious near-term environment. Indian IT firms are still in the early stages of building artificial intelligence capabilities through partnerships and acquisitions, with brokerages expecting meaningful AI-driven demand to materialize only over the next six months to 2026.
Stock market performance mirrors these challenges, with the Nifty IT index falling 12.6% in 2025, making it the worst-performing sector, as foreign investors pulled out a record $8.5 billion from IT stocks. Tata Consultancy Services is set to kick off the earnings season on January 12, with revenue growth expected to slow to about 4.2%. Infosys and HCLTech are forecast to post modest growth as well, with most brokerages not expecting upgrades to their fiscal 2026 guidance. While near-term pressures persist due to fewer working days, wage hikes, and margin constraints, analysts believe resilience in BFSI demand, deal ramp-ups, AI strategy formation, and a weaker rupee could provide support by mid-2026.
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