Q2 FY27 preview: Infosys, TCS, HCL Tech, peers brace for subdued growth amid AI pressure

AI generated image for representational purposes only.India’s top IT services companies are bracing for yet another soft earnings season as macroeconomic uncertainties and artificial intelligence-driven productivity pressures continue to weigh heavily on demand.Brokerage firm JM Financial has painted a cautious picture for Q2FY27, noting that the industry is entering its fourth consecutive year of subdued growth.“No meaningful improvement in demand, continued AI-led productivity pressure and rising competitive intensity point to another soft quarter for large Indian IT,” JM Financial said.In a recent preview report, the firm noted that a ‘wait and watch continues’ for the sector.

Growth for most major players is projected to hover between a muted negative 0.5 per cent and 2.6 per cent sequentially, with no meaningful improvement in client demand or deal momentum on the horizon.Tata Consultancy ServicesLeading the pack, Tata Consultancy Services (TCS) is estimated to post a marginal 0.5 per cent sequential constant-currency revenue growth, navigating a muted environment despite an expected healthy total contract value of $8 to 10 billion.JM Financial expects TCS to report a net profit of ₹13,702.5 crore, with margins marginally improving as wage hike cycles conclude.InfosysMeanwhile, Infosys is projected to deliver a slightly better 1.2 per cent sequential growth, aided by its Optimum acquisition and a reversal in its base due to a client termination.However, the brokerage anticipates that Infosys will revise its full-year guidance downwards."Given no change in demand trends, we expect Infosys to cut the upper end of its guidance by 50bps," JM Financial stated, forecasting a revised revenue growth guidance of 1.5 to 2.5 per cent for FY27, while keeping its margin guidance intact at 20 to 22 per cent.The company’s net profit for the quarter is expected to reach ₹8,126.5 crore, supported by steady deal wins in the $2.5-3 billion range.HCL TechHCL Tech is expected to outpace its peers in overall growth, with JM Financial pegging its sequential constant-currency growth at 3 per cent, bolstered by recent mega-deals, including a European contract and the Guardian deal.Consequently, the firm expects HCL Tech’s deal bookings to land between $3 and 3.5 billion for the quarter.Looking ahead to the rest of the financial year, the brokerage expects HCL Tech to narrow its organic IT services revenue growth guidance to a tighter 2-4 per cent range.

However, recent acquisitions like the Hewlett Packard Enterprise telecommunications business will add incremental muscle.For the September quarter, HCL Tech is expected to report a net profit of ₹4,760.1 crore, with margins remaining steady.Wipro and Tech MahindraWipro continues to lag behind its industry peers, with JM Financial forecasting a 0.5 per cent sequential revenue decline in constant currency for its IT services business.Reflecting this prolonged softness, Wipro is expected to guide for a lacklustre Q3FY27 revenue growth of negative 1.5 per cent to a positive 0.5 per cent.

Its net profit is estimated at ₹3,489.9 crore.Conversely, Tech Mahindra offers a better spot with growth visibility, driven by the ramp-up of large telecom deals.

The brokerage expects Tech Mahindra to clock 1.5 per cent sequential growth and net profit of ₹1,797.6 crore, alongside deal wins expected to range between $800 million and $1 billion.Furthermore, its margins are expected to expand significantly due to internal efficiency initiatives such as Project Fortius, even as it works toward its longer-term margin goal of 15 per cent.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own.

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