Indian IT Q3 Results Show Mixed Signals Amid Persistent Challenges
India's information technology giants delivered stronger-than-expected December quarter earnings. However, this positive performance fails to conceal deeper structural issues plaguing the sector. Major players continue to struggle with weak demand visibility and slowing growth trajectories as they enter the final quarter of the fiscal year.
Quarterly Beats Versus Annual Concerns
The October-December period brought earnings surprises that lifted market sentiment temporarily. Yet four of India's five largest IT services companies now face weaker full-year growth compared to last year. This disconnect between quarterly performance and annual deterioration has begun to trouble industry analysts significantly.
Tata Consultancy Services risks experiencing a rare annual revenue decline. Infosys Ltd and HCL Technologies Ltd are staring at slower growth than previous years. Wipro Ltd braces for a third consecutive year of contraction. Only Tech Mahindra Ltd appears positioned to buck this troubling trend.
Bank of Baroda Capital Markets analysts Girish Pai and Lopa Notaria noted in a January 12 research note that FY27 might show modest improvement over FY26. They described the current environment as likely representing a fourth year of slow revenue growth, suggesting that slow has become the new normal for the industry.
Individual Company Performance Highlights
TCS faces its stiffest annual test in years. The Mumbai-based company needs $7.78 billion in the January-March quarter to match last year's $30.18 billion revenue. This would require sequential growth of 3.65%, representing its fastest pace in five years. Three brokerages now expect TCS to end FY26 with a revenue decline, which would mark its first since listing in 2004.
HSBC analysts Yogesh Aggarwal, Prateek Maheshwari, and Sagar Desai observed that while TCS grew better than Infosys in FY25, FY26 will likely be a decline year for TCS. They attribute this pressure to weak demand visibility, a thin pipeline of large deals, and client slippages to competitors.
TCS chief executive K Krithivasan acknowledged the challenges during the company's post-earnings analyst call on January 12. He stated that while demand showed slow improvement in Q2 and continued in Q3, the company remains committed to growing better than FY25 in the international market, which accounts for 94% of revenue.
Infosys and HCLTech face growth deceleration. Second-largest Infosys has guided for 3-3.5% revenue growth in constant currency terms for FY26, compared to last year's 4.2% growth. Third-largest HCLTech, which grew 4.7% last year, has guided for 4-4.5% growth this fiscal year.
HCLTech chief executive C Vijayakumar noted during the company's earnings call that while uncertainties persist in global markets leading to slow spending growth on traditional offerings, fundamental demand for technology as a driver for business transformation remains structurally intact.
Wipro confronts prolonged decline. The fourth-largest IT services firm heads toward a third consecutive year of revenue decline. Management has guided for fourth-quarter revenue of $2.64-$2.69 billion, which implies a decline at the lower end of the range.
Motilal Oswal Financial Services analysts Abhishek Pathak, Keval Bhagat, and Tushar Dhonde noted in a January 17 research note that near-term revenue visibility will remain limited. They now build in an organic revenue decline of 0.4% and overall revenue growth of 0.5% year-on-year in constant currency terms for FY26.
Investors reacted sharply to Wipro's outlook, with shares closing 8.2% lower on the first trading day after earnings at ₹245.5. Analysts cited low growth visibility and delayed ramp-ups of large deals as primary concerns.
Tech Mahindra emerges as the lone bright spot. The fifth-largest player stands as the only one among the top five expected to improve on last year's performance. While Tech Mahindra does not offer formal revenue guidance, management has indicated expectations of higher growth.
Structural Risks Beyond Quarterly Performance
Beyond individual company performance, analysts identify deeper structural risks emerging from automation and artificial intelligence adoption. The Bank of Baroda Capital Markets analysts expressed concern that scaled AI enterprise adoption could prove more deflationary than in 2025.
They suggested that savings from such AI adoption might flow to hyper scalers who will attempt to extract more from enterprises to fund their heightened AI capital expenditures. The analysts also highlighted that Trump's multiple proposals to address affordability crisis in the United States ahead of mid-term elections in November 2026 will represent a key monitorable factor in 2026.
For an industry long accustomed to dependable mid-single-digit growth, quarterly beats offer limited reassurance. Demand visibility remains weak, growth trajectories continue to soften, and structural challenges from AI adoption and global economic uncertainties cloud the outlook for India's $283 billion IT industry.
