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Tier 2/3 IT leads the pack with healthy revenue growth and deal momentum

ICICIdirect Research 08 May 2026 DISCLAIMER

This week, Tier-2/3 IT companies delivered a relatively stronger set of results versus large caps, indicating that execution-led growth stories continue to outperform despite macro uncertainty. The key standout performers were Coforge and Firstsource Solutions, both reporting double-digit growth trajectories, healthy deal momentum and visible margin expansion, reinforcing confidence in selective mid-tier IT names.    
Starting with Coforge, the company once again delivered industry-leading growth with Q4 revenue growth of ~28.7% YoY CC. Importantly, the 12-month executable order book touched a record US$1.75 billion, up 16% YoY, providing strong revenue visibility for FY27 despite a flattish Q1 outlook due to planned portfolio rationalisation in India of a US$15-20 mn business, with growth accelerating from Q2. Margin performance at Coforge was another major positive. EBIT margins structurally expanded sharply by over 230 bps QoQ to 16.6%.
Firstsource Solutions also surprised positively with another quarter of healthy growth and improving profitability. The company reported ~12% YoY CC revenue growth in Q4, driven by BFSI and healthcare verticals along with contributions from recent acquisitions TeleMedik and PDC. More importantly, management guided for 10–13% CC growth in FY27, backed by a record deal pipeline exceeding US$1 billion and ramp-up of delayed healthcare and UK BFS programs.  Margin expansion remains another key highlight for Firstsource while management guided for further expansion to 12.25–12.75% in FY27, supported by operating leverage and AI-driven productivity gains.
Overall, the key takeaway from this week’s results is that while Tier-1 IT continues to face macro-related softness and cautious discretionary spending trends, select Tier-2 companies are still seeing robust execution, strong deal wins and margin resilience as companies with domain-led capabilities, AI monetisation strategies and strong large-deal pipelines are continuing to gain market share in the current environment.

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