India's IT giants grapple with weak growth despite resilient deal momentum

By

, ET BureauLast Updated: Jul 24, 2026, 05:34:00 AM IST

Synopsis

Infosys reported results below expectations, impacting its stock performance negatively. Other major IT companies also showed weak revenue growth in dollar terms. AI-driven sales are gaining traction, though still on a small base. Profitability varied across companies, with some margins contracting and others improving. Stock valuations reflect uncertainty over future growth prospects and market conditions.

ET Intelligence Group: The performance of Infosys in the June quarter was marginally below expectations on both revenue and profit fronts in terms of dollar as well as rupee terms. The company also lowered the upper end of the revenue guidance band for FY26 to 3% growth from the earlier expectation of 3.5% increase citing weakness in a client account. was reported marginally lower than expected.

The country's second largest IT exporter has lost 9% on bourses over the past three months. Its trailing price-earnings multiple at 14 is at a significant discount to the long-term average of above 25, reflecting the uncertainty over the growth outlook amid geopolitical tensions and the disruptive impact of the artificial intelligence (AI) technology on traditional project deployment models. Given the moderation in the revenue guidance, the stock is expected to remain under pressure in the short term despite cheaper valuation.

Agencies

PRESSURE ON STOCKS Geopolitical risks and project delays cloud outlook even as AI sales show some traction

A common thread that binds the performance of the top five IT companies is the sustained order flow. However, the sequential revenue growth in dollar terms remained weak with the excpetion of Tech Mahindra, which ranks fifth in the pecking order. It reported a 2.2% sequential growth in revenue at $1.7 billion for the June quarter. Others including Tata Consultancy Services (TCS), Infosys, HCL Technologies (HCLTech) and Wipro in the order of their revenue size either reported a drop or under 1% growth.

While slower execution due to delayed decision making by clients amid geopolitical tensions has affected the overall revenue growth, the sample companies reported traction in AI driven sales though on a small base. For Infosys, AI revenue accounted for 8.2% of the total revenue in the June quarter from under 5% a year ago. TCS too reported a similar share of 8.5% of AI revenue for the latest June quarter.

On the profitability front, TCS and Wipro reported a sequential contraction in operating margin (EBIT margin) while Infosys and HCLTech showed improvement. Tech Mahindra continued to report a sustained improvement in margin to 14.4% from 10.5% in the year-ago quarter. Employee attrition for the top IT pack remained benign amid tough market conditions while the aggregate headcount for the sample contracting year-on-year for the second consecutive quarter.

Over the past three months, barring Tech Mahindra and HCLTech which have gained 14.3% and 3.5% on bourses, others have reported 6-12% drop.

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