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IT Results - Missing the muted expectation

ICICIdirect Research 24 Apr 2026 DISCLAIMER

IT Index has been under pressure (down ~25% in last 3 months) owing to growth concern amid Gen AI disruption. The ongoing Q4FY26 earnings season for the Indian IT sector has so far delivered a mixed picture, with performance clearly diverging across players.
At the aggregate level, while deal momentum remained healthy, the FY27 growth guidance across Tier 1 players has come in meaningfully lower than expectations, dragging sentiment. Infosys guided for just 1.5–3.5% CC revenue growth for FY27 with margins at 20–22%, highlighting continued macro uncertainty and slower conversion despite healthy pipelines.  Similarly, HCLTech guided for ~1.5–4.5% revenue growth (below street expectations), with weak TCV and delayed ramp-ups indicating softer near-term visibility.  
In contrast, mid-tier outperformers like LTIMindtree and Persistent Systems continue to signal relatively better growth confidence. Persistent, for instance, is targeting a $2bn revenue run-rate by FY27 with ~16–17% margin band, indicating continued growth prioritization despite cost pressures.  And LTM is aiming to double its revenues in next 5 years implying a strong 15% CAGR. This aligns with broader commentary that select players with stronger vertical positioning and execution are seeing higher growth visibility versus Tier 1.
On the margin front, a key common theme across companies is the sharp focus on margin protection rather than expansion. Across companies, margin guidance is largely being maintained rather than expanded, with firms balancing investments in GenAI, capability building, and talent against cost optimization levers. This suggests that while profitability remains stable, upside from margin expansion may be limited in the near term.
Overall, the sector is currently in a phase where execution consistency and vertical positioning are driving differentiation. With margins largely capped and growth visibility uneven, we prefer execution-led mid-tier outperformers such as LTM and Persistent over traditional Tier 1 names as they are talking about sustaining momentum with relatively better growth visibility.

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