India’s Leading IT Companies Anticipate Lackluster Q1 as AI Investment Falls Short of Boosting Growth: Report
India’s top IT services firms are expected to report lackluster performance in the first quarter of FY27, according to a report by Equirus Securities. The report indicates that growth will remain subdued as clients focus on cost-cutting rather than large-scale technology investments. Demand is projected to stay muted throughout FY27 due to ongoing macroeconomic uncertainties and geopolitical risks, which are pressuring discretionary technology spending.
Revenue Growth Likely to Stay Subdued
Equirus forecasts that the six largest IT companies will experience constant-currency organic US dollar revenue growth ranging from a decline of 1.7% to an increase of 1.1% quarter-on-quarter for the June quarter. Wipro’s IT Services business is anticipated to be at the lower end of this range, while Tech Mahindra is expected to lead in growth. On a reported basis, constant-currency consolidated dollar revenue is projected to fluctuate between a 1.1% decline and 1.7% growth quarter-on-quarter. Cross-currency headwinds may further dampen growth by up to 30 basis points. Although AI adoption is increasing, enterprises are primarily funding these initiatives through productivity gains and vendor consolidation, limiting immediate revenue growth.
Margins Seen Holding Up Despite Weak Demand
Equirus expects earnings margins to remain stable, aided by a nearly 3% quarter-on-quarter depreciation in the average rupee-dollar exchange rate, reduced supply-side pressures, and ongoing cost optimization efforts. The brokerage anticipates that Infosys will adjust its FY27 constant-currency revenue growth guidance to 2.8-4.3%, excluding the Vertex acquisition, while maintaining its EBIT margin guidance of 20-22%. HCLTech is expected to keep its constant-currency services growth guidance at 1.5-4.5% and its EBIT margin outlook at 17.5-18.5%. Wipro is likely to forecast a 2% decline to flat quarter-on-quarter growth in its IT Services business for the second quarter.
AI Remains Long-Term Growth Driver
Despite the short-term slowdown, Equirus believes that IT service providers will continue to be vital in the adoption of enterprise AI. The brokerage anticipates that demand for legacy modernization, cloud migration, data engineering, and cybersecurity will create long-term opportunities. As enterprise AI architectures grow more complex, organizations are increasingly deploying a hybrid mix of large language models (LLMs), small language models (SLMs), and AI agents, which drives the need for system integration expertise. While valuations have significantly corrected in 2026, Equirus notes that substantial improvement in stock multiples will likely hinge on stronger growth visibility beyond the current quarter.
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