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IT sector Q1FY26 Result Preview

ICICIdirect Research 04 Jul 2025 DISCLAIMER

The Q1FY26 earnings season for Indian IT is likely to be a mixed bag. Notably, Tier 2 players will outshine Tier I names yet again. Coforge is expected to post a ~5-5.5% QoQ CC growth, with ramp-up of its Sabre mega-deal and strength in BFS. Persistent is also likely to see healthy ~3-3.5% QoQ growth, led by BFSI and tech verticals.

On the other hand, Tier 1 players will have a muted quarter and report CC revenue growth in the range of (-)1% to (+)1%. On reported basis, we believe huge cross currency tailwinds of ~100-200 bps shall aid US$ QoQ revenue growth for all the players.

We believe, TCS would report a revenue decline of ~1% due to the BSNL deal ramp down and Infosys is expected to raise its FY26 revenue guidance slightly, from 0–3% to 1–3%, factoring in recent acquisitions like MRE and The Missing Link.

One reason for this underwhelming performance is the disruption caused by reciprocal tariffs imposed by the US, which has hurt manufacturing and retail tech spending. Employee attrition has also mostly bottomed out for the IT sector and there are initial signs of some uptick in attrition as demand improves. Moreover, deal wins remain strong, albeit deal closures and ramp up remain sluggish.

Tier 2 players like Persistent and Coforge, are outperforming because they’re quicker in executing large deals and have lower exposure to manufacturing and more exposed to BFSI, which has been relatively stable amid the global uncertainty. That said, concerns around tariffs, geopolitics, and muted consumer demand persist. With Accenture’s recent soft deal bookings—outsourcing down 10% YoY—TCV and deal pipeline visibility and management commentary will be key to watch this quarter.

Our top picks include Coforge, Persistent and Mphasis.

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