India’s IT Sector Faces Growth Challenges in Q2 Amid Macro Headwinds
India’s IT services sector is bracing for a challenging quarter as it approaches the September 2025 results. Despite the second quarter typically being the strongest for the industry, analysts from Investec predict varied performances among companies due to ongoing macroeconomic uncertainties, tariff risks, and cautious client spending. Major brokerages, including Kotak Institutional Equities and Motilal Oswal Financial Services, foresee modest growth for Tier-I firms, while mid-tier companies are expected to outperform their larger counterparts.
Predicted Growth for Tier-I Companies
Analysts from Kotak Institutional Equities estimate that Tier-I IT companies will experience revenue growth between 0.2% and 2% for the September quarter. Infosys is projected to lead the pack with a 2% quarter-on-quarter growth, followed closely by HCLTech at 1.7%. In contrast, Tata Consultancy Services (TCS) and Wipro are expected to lag, each reporting around 0.2% growth. Similarly, Motilal Oswal’s forecasts align with these trends, predicting Infosys will achieve a 2.4% sequential growth, HCLTech at 1.7%, TCS at 1%, and Wipro at 0.3%. Tech Mahindra and LTIMindtree are also expected to perform modestly, with growth rates of 1% and 2%, respectively.
Mid-Tier Companies Show Stronger Momentum
In contrast to their larger peers, mid-tier IT firms are anticipated to deliver stronger results. Kotak highlights Coforge as a leader in this segment, projecting a remarkable 6% growth, followed by Persistent Systems at 4%. Motilal Oswal echoes this sentiment, forecasting similar growth figures for Coforge and Persistent, with Hexaware also expected to perform well at 3.3%. This robust performance among mid-tier companies is attributed to the successful ramp-up of large cost-saving and consolidation deals, which have bolstered their financial standings amid a challenging economic landscape.
Sector-Specific Challenges and Opportunities
The upcoming quarter is expected to reveal divergent performances across various sectors within the IT industry. While the Banking, Financial Services, and Insurance (BFSI) segment is projected to remain resilient, other sectors such as automotive and retail are facing significant challenges due to tariff pressures and margin constraints. Engineering, Research and Development (ER&D) firms, particularly those linked to automotive clients, are likely to experience another soft quarter. However, analysts anticipate a rebound in the second half of the year as delayed projects resume, potentially revitalizing growth in these sectors.
Margin Stability Amid Economic Pressures
Despite the anticipated growth, margins in the IT sector are expected to remain stable, primarily supported by the depreciation of the Indian rupee. Nevertheless, analysts caution that pricing pressures, rising wage costs, and the deflationary impact of generative AI (GenAI) could limit potential gains. According to Kotak, GenAI is currently exerting a deflationary effect of 2-3%, particularly in areas such as coding and contact-center business process outsourcing. The long-term implications of GenAI on IT budgets remain uncertain, adding another layer of complexity to the industry’s outlook as it navigates through these economic challenges.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
Follow Us on Twitter, Instagram, Facebook, & LinkedIn
