Synopsis
Forrestor expects tech services spending in the U.S to grow by 5.2% in 2026, and global tech services spending to grow at 4.6%, with the latent demand for AI-led services expected to fuel service providers’ revenue growth, Sharma highlighted.Analysts at JPMorgan noted that Indian IT firms are still in the early stages of AI adoption, and are yet to cash in on any reflation benefits from AI-led services.
While the brokerage clocks in a revenue growth of 0.6% in constant currency terms in Q4 for Tata Consultancy Services and 1% for Tech Mahindra, it estimates a sequential decline for others. Infosys’s revenue growth is expected to decline by 0.7%, Wipro by 1.3%, and HCLtech by 1.6%.
“In Q4, we heard only selective headwinds from geopolitics and AI weigh on deal closures and rampups. We believe IT services are still in the first stage of the AI adoption cycle. Given that visibility on the inflection point to reflation remains distant, we moderate our medium-term growth recovery assumptions,” the analysts stated in a note.
“This means, we don’t expect scale firms to return to their long term average growth of 7%-8% in the medium term,” they added.
Another global brokerage, CLSA, noted that while there is no evidence of increased deflationary impacts from the West Asia conflict or AI-led tools launched by Anthropic or OpenAI, impact of uncertain macroeconomic conditions will still keep revenue growth muted on a sequential basis.
CLSA estimates TCS’ revenue to grow 1% QoQ in constant currency terms, and 1.9% for Wipro. However, the brokerage forecasts a flat quarter for Infosys, and negative revenue growth for HCLTech by 1.2%.
On a year-on-year basis, the companies are expected to grow between 2.2% and 8.1%.
CLSA forecasts improved performance in verticals such as banking, financial services and insurance (BFSI) and technology in Q4, while it sees some softness in manufacturing (including automobiles) and retail.
The mixed estimates reflect a period of transformation for the $297 billion tech services industry, analysts said.
“There are obviously certain parts of service provider work which will get impacted both positively and negatively. Negative, as in, the quantum of work done by tech services will go down, but positively, companies will get more efficient with AI-led work,” said Ashutosh Sharma, vice president and research director at Forrester.
“However, the amount of work that organisations are looking to do because of their belif in AI, it will end up as a net positive for service providers,” he added.
Forrestor expects tech services spending in the U.S to grow by 5.2% in 2026, and global tech services spending to grow at 4.6%, with the latent demand for AI-led services expected to fuel service providers’ revenue growth, Sharma highlighted.
Industry watchers emphasised that revenue guidance for FY27 will be crucial for IT services companies, to look for signs of market demand amid AI disruption concerns in the market.
“A key step on the way to allaying investor fears of AI compression is FY27 guides thats signal confidence and growth acceleration,” JP Morgan analysts noted, emphasising the focus primarily on revenue.
