Q1 FY26 Earnings: TCS to kick off results season this week; How Infosys, other peers may fare

India’s IT sector is approaching the Q1 FY26 earnings season with tempered expectations, as a mix of global macro pressures, a delay in client decision-making, and tariff-related uncertainty in the US clouds the overall sentiment. However, with Nifty IT up nearly 20 per cent from April lows, analysts argue that the quarterly performance won’t live up to current valuations.

Growth might be uneven

Brokerages are indicating a soft and lumpy growth print for Q1FY26, especially in constant currency (CC) terms.

According to HDFC Securities, tier-1 IT companies may see sequential CC growth ranging from -2.8 per cent to +1.5 per cent, while mid-tier firms may start seeing growth rates in a range of -3.4 per cent to +3.7 per cent.

The large caps are also expected to see differing growth with Infosys and LTIMindtree expected to show positive sequential growth thanks to the ramp-up of earlier deal wins and vertical resilience, while Wipro, HCL Tech, TCS and Tech Mahindra are expected to report a decline in revenue, which can be attributed to seasonality and client-specific issues.

Discretionary IT spending stays weak

While deal pipelines remain strong, the actual conversion into revenue remains slow, as clients across the US and Europe continue to delay decision-making amid trade and inflation-related uncertainty. Segments like manufacturing, auto, and consumer packaged goods (CPG) are likely to weigh down growth.

On the flip side, banking and financial services (BFSI), energy, and utilities are expected to lend stability, with cost takeout deals and vendor consolidation leading the flow.

“Total contract value alone may not be a growth indicator anymore,” said JM Financial Institutional Securities in its latest note. “Vendor consolidation is often a zero-sum game—what one firm gains, another loses.”

Why do the margins look flat?

Despite the deferment of FY26 wage hikes by several IT players, operating margins are expected to remain range-bound.

As per Jefferies India, aggregate EBIT margins for companies under its coverage are likely to hold at around 19.8 per cent.

Dollar-rupee tailwinds may offer some support to US revenue figures, but without meaningful top-line expansion, the operating leverage may remain muted.

Margins, analysts note, will also depend on company-specific levers such as utilisation, on-site mix, subcontracting costs, and automation gains.

All eyes on Infosys, Wipro, and HCL

Investors and analysts will closely track whether Infosys, Wipro, and HCL Tech revise their FY26 or Q2FY26 revenue growth guidance, especially in light of soft macros in the US and the evolving impact of AI transformation.

Infosys currently guides for 0–3 per cent growth in FY26, while HCL Tech has projected 2–5 per cent. Any revision—upward or downward—could trigger stock-specific moves.

Valuations look stretched after sharp rebound

The Nifty IT index has surged 20 per cent from its 52-week low of 32,517 in April, outperforming broader indices. It now trades at 24x one-year forward earnings, a premium to its long-term average of 20x, according to Bloomberg data.

However, as JM Financial notes, “while the worst-case macro has not played out, the overall environment remains uncertain.” Without a clear earnings upgrade cycle in place, such valuations may be hard to justify.

Key Q1FY26 IT sector monitorables

Bottom line

The upcoming Q1FY26 earnings season may not be a blockbuster for Indian IT firms, but it offers enough cues on client behaviour, vertical-specific trends, and management outlooks that will shape sentiment ahead. For now, investors may prefer sticking with high-visibility names like Infosys and LTIMindtree, while watching for commentary around AI, BFSI momentum, and any guidance tweaks by the majors.