Top Tier IT Companies Likely to Report Revenue Growth of 2-5% in FY26: Motilal Oswal For the fourth quarter ended March, revenue growth of tier-I companies are expected to be in the range of -1.0 per cent to flat QoQ
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As Indian IT services companies are set to announce their fourth quarter earnings this week, all eyes now will be on the FY26 guidance. Top tier IT services companies are expected to forecast a revenue growth guidance of 2-5 per cent in constant currency (CC) in FY26, according to brokerage firm Motilal Oswal.
"We expect Infosys to guide for 2.5-5 per cent CC growth for FY26; and expect HCLTech's top end to be in a similar range," the brokerage firm said in a pre-earnings note.
For the fourth quarter, Motilal Oswal expects aggregate revenue for its coverage universe to grow by 7.8 per cent YoY, while EBIT and PAT are likely to grow at 7.1 per cent and 5.7 per cent YoY (all in INR terms). It expects about 50-80 basis point cross currency headwinds on a sequential basis.
For the fourth quarter ended March, revenue growth of tier-I companies are expected to be in the range of -1.0 per cent to flat QoQ CC. Revenue of tier-II players is expected to grow to the tune of -0.5 per cent to 5 per cent QoQ in CC terms.
According to the brokerage firm, Infosys and TCS are likely to report a revenue decline of 1.0 per cent and 0.5 per cent QoQ in CC terms, respectively, whereas HCLTech is anticipated to clock a 0.6 per cent decline in Q4 FY25, driven by tapering of deal ramp-ups in telecom and seasonal weakness in the Products and Platforms segment.
Meanwhile, Tech Mahindra is likely to post a 0.8 per cent QoQ revenue decline and Wipro may report flat revenue QoQ. LTIMindtree could deliver 0.2 per cent QoQ CC growth despite productivity pass-back in a key account spilling into Q4.
"Among mid-tier firms, we expect LTTS to lead the pack with about 15 per cent CC QoQ revenue growth (organic growth of 7 per cent), driven by broad-based growth and inorganic contribution from Intelliswift. Persistent/Coforge are also likely to deliver 4.0 per cent/3.0 per cent CC QoQ growth, while Mphasis could post 3.0 per cent CC QoQ growth," Motilal Oswal said.
The EBIT margins of TCS are likely to remain flat QoQ despite BSNL ramp-down owing to headwinds from talent investments. HCLTech's margins may decline about 190 basis points, led by wage hikes (50-60 basis points), slower growth, and decline in the high-margin products and platforms segment. Infosys may see a 70 basis points dip due to wage hikes and visa costs, partially offset by cost optimizations and lower third-party spend. LTIMindtree's margins are likely to stay flat at 13.8 per cent. Wipro margins should remain around 17.0-17.5 per cent, with no major headwinds.
The net headcount addition would be lower across all the IT companies, owing to a muted demand recovery and an overall cautious environment across the industry.
