Based on the results of the top five IT services companies for the first quarter of 2025-26 (Q1FY26), analysts say the possibility of hitting high single-digit revenue growth in FY26 looks unlikely.

The top five IT players are Tata Consultancy Services (TCS), Infosys, HCL Technologies, Wipro, and Tech Mahindra.

According to UnearthInsight, tech services will grow by 3-5 per cent in FY26, with leading Indian IT companies likely to experience modest, incremental growth rather than a strong recovery in the near term.

Persistent geopolitical uncertainties, evolving US tariff dynamics, and a weak global economic outlook are expected to delay deal closures and extend the timeline for a meaningful recovery in client spending.

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Over the past two financial years, the top five Indian IT players have posted consolidated annual revenue growth in the low single digits: 4.9 per cent in FY25, and 4.8 per cent in FY24.

These are the slowest growth rates since FY21, when the group clocked 5.8 per cent growth.

“The top five IT players show a mixed and cautious scenario. While macroeconomic headwinds and conservative client budgets remain significant challenges, there is a discernible and growing focus on artificial intelligence (AI)-led transformation and digital initiatives,” said Gaurav Vasu, founder and chief executive officer of UnearthInsight.

Though the revenue growth was soft for most of the players, the total contract value (TCV) or deals signed in Q1FY26 remained healthy.

TCS, despite a fall in the revenue sequentially, reported an order book of $9.4 billion.

Similarly, Infosys reported large deal TCVs at $3.8 billion.

For HCLTech, the total order value came in at $1.81 billion.

Among the top players, Infosys seems to be the best performer, more so as the firm increased the lower end of its revenue growth guidance for FY26.

“Unless demand returns, these companies will not grow at all, and wage hikes are a process to prevent margin erosion because there is little top-line growth.

“While the companies are talking of baking AI into all deal conversations, productivity benefit of about 20 per cent is only happening in specific pockets because adoption of AI takes a lot of time,” said an analyst on the condition of anonymity.

The pressure on growth is also evident in margins.

While Infosys managed to grow well and beat estimates, its operating margins were down 30 basis points (bps) to 20.8 per cent on a year-on-year (Y-o-Y) basis.

The fact that Infosys still expects full-year margins to be within 20-22 per cent, despite some improvement in deal visibility and pipeline, indicates that it will be under pressure.

HCLTech has upped the lower end of its revenue guidance for FY26 to 3-5 per cent on a constant currency, up from 2-5 per cent it projected in April.

However, the firm cut its Ebit margin guidance to 17-18 per cent from 18-19 per cent earlier.

Vasu added that while margins have generally remained steady, it is more due to strong operational discipline and cost measures.

The reason for a slow year is also that for a majority of players, their major market, the US, and several verticals continue to lag.

Gaurav Parab, principal research analyst, NelsonHall, an industry research firm, said that there are no clear sectoral trends yet.

“Though BFSI (banking, financial services and insurance) is showing signs of revival, most players remain cautious on discretionary spending, even as tariff-related uncertainty begins to ease with new trade deals being signed.

“BFSI’s Q1 momentum appears driven more by trading gains than a structural economic shift in the US,” said Parab.

He further added that consumer-facing sectors like retail remain largely flat — excluding discount giants who are showing growth — impacting the performance of IT vendors with significant exposure to this space.

While AI remains the buzzword across firms, quantifiable wins remain elusive. Most companies no longer disclose the number of AI-led deals, and focus instead on productivity gains, typically in the 5-10 per cent range, he said.

“Across the board, IT services firms have built their own AI platforms — often in partnership with independent software vendors (ISVs) — to support application development, testing, and maintenance.

“In deal pursuits, these providers now take a more measured approach to pricing AI capabilities, either as standalone components or embedded within broader service offerings,” Parab added.