IT Sector Q4FY26 Preview: FY27 growth seen 3-5%

Nifty IT enters results week under pressure

The Indian IT services sector heads into the Q4FY26 earnings season with sentiment still cautious. The Nifty IT index has slipped nearly 20% over the past three months, as investors weigh soft client spending and macro uncertainty against improving year-on-year trends. Major IT companies are set to begin reporting Q4FY26 results from April 9, starting with Tata Consultancy Services (TCS).

Brokerages expect the March quarter to be seasonally softer, with limited sequential momentum across most large companies. Even so, currency tailwinds and easing base effects are expected to support a stable-to-improving year-on-year picture for Tier-1 firms. Management commentary on demand, deal wins, and FY27 guidance is likely to be the key market trigger through the results cycle.

What brokerages expect from Q4FY26 growth

Kotak Institutional Equities expects a subdued quarter for the IT services sector, with weak sequential growth in organic constant currency (CC) terms. Sector performance in Q4FY26 is expected to range from a decline of around 1% to growth of up to 1.5% quarter-on-quarter.

The note also flags a gradual recovery on a year-on-year basis, with Tier-1 companies likely to post low-to-mid single-digit improvements. The near-term setup remains a mix of seasonal headwinds, fewer working days, and cautious discretionary spending. At the same time, currency movements are seen supporting margins for some companies, offset by cost and pricing factors.

Company-by-company: Kotak’s constant currency expectations

Kotak’s Q4FY26 preview suggests a split picture across large caps, with TCS expected to remain marginally positive sequentially, while Infosys, HCL Tech, and Wipro are expected to report sequential declines.

Year-on-year trends indicate a modest recovery led by Infosys and HCL Tech, while other companies remain more subdued. Tech Mahindra is seen as stable on a sequential basis with moderate year-on-year growth.

TCS: BFSI strength and no furloughs in focus

TCS is expected to lead Tier-1 growth in Q4FY26, supported by strength in the Banking, Financial Services, and Insurance (BFSI) segment and the absence of furloughs in the quarter. Kotak also highlights the company’s focus on deal wins and AI-led growth acceleration, even as the pace of large deal total contract value (TCV) has slowed.

TCS will kick off the sector’s results cycle on April 9. Investors are expected to focus on demand commentary, deal conversion, and the balance between pricing discipline and volumes amid a cautious spending environment.

Infosys: seasonality hits QoQ, guidance becomes key

Infosys is expected to report dull quarter-on-quarter performance due to seasonality, even as its year-on-year trend is projected to show recovery. The company has provided 3-5% growth guidance for FY27, keeping attention firmly on execution and the demand outlook.

Key monitorables flagged include the impact of Generative AI, the health of the deal pipeline, and client decision delays. Infosys is scheduled to report Q4FY26 results on April 16.

HCLTech and Wipro: services support versus pricing pressure

For HCL Tech, growth is expected to be supported by the services segment, partly offset by seasonal weakness in the products business. Margins are likely to be aided by currency tailwinds, and the company’s guidance commentary around 3-5% growth remains a central point for investors. HCL Tech’s Q4 results are due on April 21.

Wipro is forecast to underperform peers, with weak growth guidance of -2% to 0% amid deal delays and pricing pressures. Market focus remains on turnaround execution and a revival in large deal wins. Wipro’s result date is April 23.

Result dates and what “performance” signals imply

With results spread across April, the sequence matters because early commentary can shape sector expectations. Alongside growth and margins, investors are likely to compare company narratives on discretionary spending and deal decision cycles.

FY27 outlook: 3-5% growth range, AI adds pricing questions

The outlook for FY27 remains cautious in brokerage commentary. Industry growth is projected at 3-5%, reflecting geopolitical uncertainties and structural shifts in IT services demand. Generative AI is increasingly viewed as a factor that could add pricing pressure and deflation risk in traditional service lines, especially where efficiency gains are shared with clients through lower pricing.

At the same time, brokerages note that companies continue to point to a healthy deal pipeline. For markets, that puts greater weight on conversion timelines, pricing, and whether discretionary projects restart meaningfully across verticals beyond BFSI.

Market impact: valuation reset and what investors are watching

The recent correction has pulled down sector valuations. One report cited the IT sector trading at 21.7 times forward earnings, about 14% below its five-year average. Another brokerage view highlighted a 30-40% compression in sector multiples following the narrative shock from recent AI breakthroughs.

Against that backdrop, the earnings season becomes important for two reasons: first, whether FY27 guidance supports the 3-5% growth frame; and second, whether management commentary reduces uncertainty around AI-led efficiency, pricing, and medium-term demand. Brokerages also flag BFSI as relatively resilient, while recovery across healthcare, manufacturing, hi-tech, and retail remains uneven.

Conclusion

Q4FY26 is shaping up as a seasonally soft quarter for Indian IT, with muted sequential growth expected across most Tier-1 companies and a modest year-on-year recovery led by Infosys and HCL Tech. With the Nifty IT index down sharply in recent months, April result commentary, especially FY27 guidance and deal trends, will likely drive near-term market positioning.