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Indian IT Q2FY27 Preview – Tier 2 companies to lead the growth again

ICICIdirect Research 01 Oct 2026 DISCLAIMER

We expect Q2FY27 earnings season to witness 0.5% to 1.3% QoQ CC revenue growth across Tier 1 IT services companies, despite seasonally strong quarter, amidst muted demand, volatile macro and AI led deflation.
Among Tier-1 players, Tech M is likely to post revenue growth of 1.3% QoQ CC, driven by new deal ramp up and healthy growth across verticals. Infosys is expected to report 1% QoQ CC revenue growth on organic basis, as Q1 had some one-time impact.  TCS is expected to post ~0.5%QoQ CC growth, amidst slow conversion of TCV to revenues. HCLTech is likely to report organic revenue growth of 1.2% QoQ CC, owing to low Q1 base and ramp up in new deals. Notably, LTM is expected to post growth of ~1.1% QoQ CC, partly impacted by the continued weakness in the Middle East and seasonal weakness in top technology accounts.
Tier-2 IT firms are again expected to outperform, led by strong deal ramp-ups and market share gains. Persistent Systems is likely to deliver ~6.5% QoQ CC growth, which will be largely driven by a large deal ramp up coupled with sustained growth in its BFSI segment. On the other hand, Coforge (~3.5% QoQ CC) and Mphasis (~3% QoQ CC) are expected to post healthy growth driven by strong deal wins over the last few quarters and broad-based growth. On the healthcare focussed firms, IKS Health is likely to strong 4.5% QoQ organic growth in a seasonally strong Q2, while Indegene is expected to report 2.6% QoQ USD growth, led by robust traction in ECS (Enterprise Commercial Solutions) vertical and large deal ramp up.
We expect margins performance to be largely stable (QoQ expansion ranging from 0-10 bps) across the space barring Persistent, which is likely to witness 150-170 bps QoQ impact on margins, owing to wage hike. 
Deal activity remained largely stable amidst muted CY26 client budgets. Management commentary is expected to focus on growth outlook, wherein we expect tier 1 companies to slightly narrow their top line growth guidance to flattish to marginal growth. Other key monitorable would-be AI-led productivity impact and impact of Middle East conflict on decision-making and billing cycles. Tier 2 companies like Persistent, Coforge, Mphasis etc. coupled with Health Tech players like Indegene and IKS Health are likely to lead revenue growth, which further drives our preference on the same, while we remain cautious on Tier 1 pack amidst challenge of slower growth, delayed ramp ups and size which warrants a bigger change in workforce structure.
Unlike traditional IT services, where growth remains closely linked to discretionary enterprise technology budgets and macro conditions (currently growing at low to mid-single digits), IKS and Indegene are positioned around more structural outsourcing and workflow-transformation opportunities (opportunity of sustainable double-digit growth) and relatively lower macro-economic risks.
We estimate IKS to deliver ~15% organic dollar revenue growth CAGR, translating ~24% earnings CAGR over FY26–29E, and have initiated coverage with a ₹2,110 target price (16% upside) ; while for Indegene we expect it to deliver ~14% dollar revenue growth CAGR, resulting into ~22% earnings CAGR over FY26-29E and have initiated with a target price of ₹750 (23% upside).  

 

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