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Indian IT Q2FY26 Preview: Modest recovery, Tier-2s to outshine again

ICICIdirect Research 10 Oct 2025 DISCLAIMER

We expect Q2 earnings season to see a modest sequential uptick, supported by currency tailwinds as the rupee’s ~2% QoQ depreciation against the US dollar is set to aid reported revenue growth, though underlying demand remains tepid.
Tier-2 IT firms are once again expected to outpace their larger peers, led by continued momentum in deal ramp-ups and BFSI traction. Coforge is likely to deliver robust ~5.5–6% QoQ CC growth, aided by the ongoing scale-up of its Sabre mega-deal and BFS wins. Persistent Systems is also expected to post ~3.5% QoQ CC growth, driven by BFSI and tech vertical strength.
Among Tier-1 players, growth is expected to remain muted, with CC revenue changes ranging from (-0.5%) to +1.8% QoQ. Infosys’s numbers should benefit from inorganic contributions from MRE and The Missing Link, while margins might see benefits from absence of wage hikes. LTIM revenues shall be aided by ramp-up of a large deal and top account pass-through largely being behind.
Deal activity remains encouraging, but delayed closures and sluggish ramp-ups may continue to cap near-term visibility. Overall, Q2 is expected to mark a steady but unspectacular quarter, with focus shifting to commentary on FY26 demand recovery, AI led investments/transformation deals and large-deal execution.
Top sector picks: TCS and Tech Mahindra among Tier-1s; CoforgePersistent Systems, and Mphasis in Tier-2 space.

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