Indian IT Q1 FY27 Preview: Growth Seen -1.7% to 1.1%

Why Q1 FY27 is shaping up as a soft quarter

India’s leading IT services companies are expected to report a muted start to FY27, with clients continuing to prioritise cost-cutting over large, discretionary technology programmes. Multiple brokerage previews point to a familiar pattern: steady deal pipelines, but slower decision-making and limited revenue conversion in the near term. Equirus Securities flagged that growth visibility may not improve meaningfully until enterprises move beyond cost optimisation and begin committing to larger AI-led transformation programmes. Motilal Oswal similarly expects a subdued first quarter, and said weak demand conditions could persist into the second quarter as well. The broader message is consistent across reports: discretionary tech spending remains under pressure, and near-term growth levers for large vendors look limited.

Equirus: top six growth range remains narrow

Equirus expects the top six large IT companies to report 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. On a reported basis, constant-currency consolidated dollar revenue is projected to range from a 1.1% decline to a 1.7% growth quarter-on-quarter. It also highlighted cross-currency headwinds that could reduce growth by up to 30 basis points. The report’s central point is not just the range, but the lack of a clear trigger for a broad-based re-acceleration. Equirus expects demand to remain measured through FY27, citing macroeconomic uncertainty and geopolitical risks that continue to restrain discretionary IT spends.

Motilal Oswal: weak start may extend into Q2

Motilal Oswal’s preview also points to muted sequential revenue growth across the sector, with the weak demand environment expected to persist into 2Q FY27. The brokerage noted that macroeconomic uncertainty, AI-led disruption and geopolitical overhangs are weighing on discretionary technology spending and lengthening decision-making cycles. It added that the first half of FY27 is tracking below the pace required to achieve the upper end of companies’ full-year guidance. In that context, it argued the growth required in the second half to bridge the gap looks increasingly impractical.

Large caps vs mid-caps: divergence in sequential momentum

Motilal Oswal expects large-cap IT companies to deliver sequential constant-currency growth in the range of a 1.5% decline to a 2% increase. Mid-caps are expected to outperform again, with growth ranging from a decline of 1% to growth of 4.8%, aided by continued large-deal ramp-ups. The implication for investors is that execution and ramp-up timing may matter more than headline demand commentary this quarter. It also underlines a recurring theme in the current cycle: large vendors are competing intensely for a similar pool of consolidation and cost-optimisation deals, while select mid-tier firms may show better near-term conversion depending on ramp schedules.

Guidance watch: potential trims at the top end

Motilal Oswal said it expects companies to walk back the top end of their guidance bands this quarter. It specifically expects Infosys to lower the upper end of its FY27 guidance by 50 basis points, while HCLTech could trim the upper end of its services growth guidance by 100 basis points. Separately, guidance already reflects caution across large caps. Infosys has guided for year-on-year revenue growth of 1.5% to 3.5% in constant currency terms for FY27. HCLTech has pegged FY27 revenue growth at 1% to 4%, with IT services revenue growth at 1.5% to 4.5%. Wipro has guided Q1 FY27 at -2% to flat, and has also indicated a revenue decline in the June quarter, though the drop was described as less severe than anticipated.

What is driving caution: geopolitics, macro and AI pricing pressure

Brokerage commentary repeatedly points to three pressure points. First, macroeconomic uncertainty is keeping enterprise budgets conservative, particularly for discretionary projects. Second, geopolitical tensions, including a West Asia-related overhang cited in reports, are contributing to delays and slower decision cycles. Third, AI is adding a new layer of pricing and delivery disruption. Kotak Institutional Equities highlighted that FY27’s first quarter could be weak, citing the West Asia situation, rising pricing pressure from GenAI, and the impact of hedging, which may limit the benefit companies typically get from rupee weakness.

Deal mix: cost optimisation dominates, transformation waits

Motilal Oswal noted that near-term growth levers remain limited because vendors are chasing a similar set of large deals that are largely vendor consolidation and cost optimisation in nature. It added that deal sizes have shrunk and competition is pressuring margins. The note also referred to AI deflationary pressure of about 2% to 3% annually on core business lines, which would need to be offset by AI-linked revenue that may take time to scale. Equirus echoed this framing by suggesting growth visibility improves when enterprises move from optimisation projects to larger AI-led transformation programmes.

Currency and margins: a small positive, but not a cure-all

Currency remains a swing factor, but previews suggest it is not enough to change the near-term growth picture. Motilal Oswal expects most companies to face a modest cross-currency headwind of around 20 to 50 basis points, while Equirus flagged headwinds of up to 30 basis points. One note described rupee depreciation as the “only saving grace,” but also indicated margins could be under stress. JP Morgan said it cut 1Q revenue growth assumptions for all companies, citing delays in deal closures and revenue conversion, and pointed to delays in deal ramp-ups and signings amid geopolitical uncertainty and rapid AI-related changes.

Market context: IT has lagged, but sentiment is mixed

Within Indian equities, IT and metals have been laggards, though IT showed signs of a gradual recovery during the week referenced in the provided material. Short covering, value buying and an AI-based business deal by Indian IT firms were cited as factors that reversed late selling. Even so, the longer-term stock performance backdrop remains challenging. IT stocks have fallen as much as 34% year-to-date in 2026, compared with a 9% drop in the Nifty50, as AI-led shifts disrupted the traditional outsourcing model and redirected budgets toward AI infrastructure, models and software.

Key numbers to track this earnings season

Why this quarter matters for investors

This earnings season is likely to focus less on whether growth is positive or negative in a given quarter, and more on what management teams say about conversion timelines, pricing, and the mix of optimisation versus transformation work. The reports also highlight how external signals can shape sentiment. Accenture’s weaker-than-expected bookings and its decision to lower the upper end of its revenue growth forecast were cited as an immediate trigger for reassessing how quickly enterprise budgets can rebound. With guidance across large caps clustered in low single digits, investors are balancing cautious near-term commentary against the potential for improvement when larger AI-led programmes start moving from planning to execution.

Conclusion: muted Q1 sets up a cautious FY27 start

Brokerage previews from Equirus, Motilal Oswal and Kotak Institutional Equities broadly converge on a muted Q1 FY27 for Indian IT, driven by cost-focused client behaviour, slower decision cycles, and AI-related pricing pressure. Currency may provide limited support, but cross-currency headwinds and margin pressure remain key watchpoints. The next set of cues is expected from company commentary during the earnings season, especially on guidance bands, ramp-up timing for large deals, and whether discretionary spending shows any tangible improvement into 2Q FY27.