New Delhi: Indian IT companies are expected to report another subdued quarter for July to September, as global uncertainty keeps clients cautious about signing deals and spending on non-essential technology projects, according to HDFC Securities.
The slowdown comes during a period that is usually strong for the industry. Weak deal wins and continued pressure on prices are likely to limit growth in the second quarter of financial year 2026-27.
Growth outlook stays weak
HDFC Securities expects leading IT companies to report quarterly revenue growth ranging from a decline of 0.4 per cent to an increase of 2 per cent, after removing the impact of currency movements.
Mid-sized companies could grow between 0.6 per cent and 6.3 per cent, with acquisitions supporting some of that expansion.
With the first half falling short of expectations, any recovery now depends on the second half. However, seasonal client holidays and employee furloughs in the third quarter could restrict improvement.
AI puts pressure on pricing
Artificial intelligence is adding to pricing pressure as clients seek a share of the savings generated by improved productivity in contract renewals and new agreements.
The estimated 6-7 per cent deflationary impact is being offset by fresh AI-focused deals, although converting these opportunities into business remains slow, the brokerage said.
IT companies argue that deploying generative AI directly remains difficult for clients with complex existing systems and strict regulatory requirements. This keeps technology integration partners important.
Recovery depends on effective deal execution as contracts increasingly link payments to outcomes.
Margins get some support
A weaker rupee, better operating efficiency and higher employee utilisation could help companies absorb salary increases.
However, concerns about AI reducing service prices continue to weigh on stock valuations, despite shares trading near historical lows and offering attractive free cash flow yields.
Investor mood remains fragile
Analysts expect softer second-quarter earnings than in the first quarter to keep sentiment subdued. Rising global bond yields, higher crude oil prices and heavy foreign investor selling could also continue to pressure Indian equities in the near term.
