Synopsis
India's leading IT companies expect modest revenue growth in FY27. Geopolitical issues and economic challenges are impacting client spending. AI is also causing price pressures. Despite these headwinds, companies are maintaining stable margins. Analysts are watching for benefits from new AI services. The focus will be on cost management and capability expansion.Listen to this article in summarized format
Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro, and Tech Mahindra are expected to report on average 2-5% growth in FY27 revenues, showed estimates from consulting firms Zinnov and UnearthInsight, and domestic brokerages.
This would follow TCS clocking a 2.4% drop in revenue in constant currency terms in FY26—its first-ever annual revenue decline since going public. Wipro posted a revenue decline for the third consecutive year in FY26, down 1.6%.
While Infosys and HCLTech reported annual revenue gains, up 3.1% and 3.9% YoY in constant currency terms, the companies widened the range of their respective annual revenue guidance for FY27. Infosys estimates revenue to grow between 1.5%-3.5%, down from 3%-3.5% in FY26, while HCLTech estimates growth between 1%-4%, accounting for the 2%-3% AI-led revenue compression. Tech Mahindra, meanwhile, clocked a modest 0.6% gain.
“The firms have done everything, partnered with their vendors, AI companies…they are using AI as well,” said Yugal Joshi, partner at US-based consultancy Everest Group. “But the challenge they are facing is the compression that is happening due to AI, price pressures and vendor consolidation which is not getting compensated through other expansion.”
However, stable margins are offering a reassurance of the companies’ ability to continue business expansion. The top five IT companies reported full-year operating margins between 13% and 25%, with TCS clocking its highest margins in four years.
“If (the companies) had not been able to get some cost discipline in place, with expanding automation and benefit-sharing with the clients, they couldn’t have held on to their margins,” said Gaurav Parab, principal research analyst at NelsonHall. “That is actually a positive thing.”
Muted guidance
Analysts at Motilal Oswal estimate a slower growth for Infosys for FY27 at 2.5% organically—the midpoint of Infosys’ guidance of between 1.5% and 3.5%)—compared with 3.1%in FY26. The brokerage estimates TCS’ annual revenue growth between 3.8% and 7% over FY26-FY28, with the increase stemming from select pockets rather than a broad-based pickup.
UnearthInsight has forecast 2%-4% growth in annual revenue for TCS, Infosys, HCLTech, and Wipro, anticipating a broad-based pullback in discretionary spending.
“FY26 has confirmed a broad-based slowdown across India’s top technology services firms,” said Gaurav Vasu, UnearthInisight’s chief executive. “Geopolitical uncertainty, supply chain disruptions, and ongoing global conflicts have pulled back discretionary technology spending across BFSI, retail, and manufacturing - the sectors that drive Indian IT revenue.”
Estimates from Zinnov, however, are slightly higher for all tier-1 companies except Wipro, estimating annual revenue growth between 3.5% and 5%, supported by an aggregate deal book of over $90 billion entering the year. Estimates for Wipro are lower, between 0% and 2%, with its revenue conversion still having room for improvement.
“Deal books are at multi-year highs, margins are expanding, and AI revenue has crossed from pipeline to recognition at a multi-billion-dollar scale,” said Sidhant Rastogi, president at Zinnov. “But the cohort-level growth rates that will get printed next year will obscure the more consequential story underneath.”
“Earlier (IT companies) were speaking a lot about deals and pipelines, but now they have started to talk a lot about delays in ramp-ups and cancellations, which is a sign of a worry,” said Joshi at Everest.
Compressed by AI, geopolitics
The widening band of revenue forecasts for the nearly $300 billion IT industry comes on the back of delayed deal ramp-ups, and the West Asia conflict and macroeconomic uncertainties, impacting decision-making among clients.
Both HCLTech and Tech Mahindra called out discretionary spending cuts by two US-based telecom clients each, while HCLTech cited the discontinuation of SAP programs by two other clients—one in the manufacturing vertical and the other in retail. Wipro’s banking and financial services (BFSI) sector was impacted by client-specific issues and delayed deal accelerations.
Infosys management mentioned that IT spending is measured amid the macro and geopolitical uncertainties, higher interest rates, rapid technology shifts, and high competitive intensity, during an earnings call, while TCS said client spending sentiment was cautious in BFSI and manufacturing.
Industry watchers however said while the headwinds persist, the next few quarters are transitional, and they have yet to see benefits from expanding the newer AI-led service areas.
“Clients are also being cautious, firefighting tariffs and West Asia impact, etc.,” Parab said. “So, IT is important for enterprises, but they are being conservative for now.”
With 5%-7% of the top five firms’ revenue coming from AI services, as per UnearthInsight estimates, the focus will be on companies’ cost rationalisation, acquisitions, and capability additions, analysts said.
