Indian IT Majors Navigate a Muted Q1 FY26: AI Hype Meets Ground Realities

The first quarter of Fiscal Year 2025-26 has delivered a mixed bag for India’s leading IT services companies – TCS, Wipro, Infosys, Tech Mahindra, and HCLTech. While pockets of strong deal wins and a growing emphasis on Artificial Intelligence (AI) offered glimmers of hope, persistent macroeconomic uncertainties, particularly in key Western markets, continue to translate into cautious client spending and a generally subdued revenue growth trajectory. The results underscore a period of strategic recalibration as these tech giants balance cost optimization with crucial investments in next-gen technologies like Generative AI (GenAI).

TCS Leads with Profit Growth Amidst Revenue Deceleration

Tata Consultancy Services (TCS), India’s largest IT services exporter, reported a net profit of ₹12,760 crore for Q1 FY26, marking a 6% year-on-year (YoY) increase and surpassing market expectations. However, revenue growth remained modest, rising just 1.3% YoY to ₹63,437 crore. In constant currency (CC) terms, revenue actually saw a 3.1% YoY decline, highlighting the impact of global headwinds. CEO K Krithivasan acknowledged the “demand contraction” due to macro and geopolitical uncertainties but pointed to robust deal closures, with a total contract value (TCV) reaching $9.4 billion. The company emphasized its focus on cost optimization, vendor consolidation, and AI-led business transformation as key drivers for client engagement. While TCS’s net margin remained healthy at 20.1%, the muted revenue performance indicates that broad-based recovery may still be some quarters away.

Wipro: Strong Deal Wins Offer a Silver Lining

Wipro’s Q1 FY26 performance saw a significant jump in net profit by 10.9% YoY to ₹3,330 crore, even as consolidated revenue witnessed a muted 0.8% YoY rise to ₹22,130 crore. The IT services segment’s revenue, in particular, saw a slight decline both sequentially and YoY in constant currency. The standout feature for Wipro was its robust total bookings, which surged by 50.7% YoY to $4.97 billion, with large deal wins more than doubling to $2.67 billion. CEO Srini Pallia highlighted that clients are prioritizing efficiency and cost optimization, and Wipro’s strong deal pipeline, particularly in AI-led transformations, positions it well for the second half of the fiscal year. Wipro has also provided a cautious outlook for Q2, projecting its IT Services business revenue to be in the range of (-)1.0% to 1.0% in constant currency.

Infosys: Awaiting Further Clarity on Growth

Infosys is slated to announce its Q1 FY26 results on July 23, 2025. Market observers will be keenly watching for updates on their revenue growth guidance for FY26, especially given the current demand environment. In Q4 FY25, Infosys had reported a 12% YoY drop in net profit and guided for a conservative 0-3% revenue growth in constant currency for FY26, alongside an operating margin of 20-22%. The upcoming results will provide crucial insights into whether the company is seeing early signs of a demand rebound or if the cautionary stance from the previous quarter persists.

Tech Mahindra: Profit Rebound and Stable Execution

Tech Mahindra reported a significant 33.9% YoY rise in consolidated net profit to ₹1,140.6 crore for Q1 FY26, a positive sign of operational improvement. Revenue from operations increased by a modest 2.65% YoY to ₹13,351.2 crore. CEO Mohit Joshi noted that the company’s performance is “steadily strengthening, reflecting disciplined execution and a focused strategy.” Deal wins for Tech Mahindra increased by 44% on a last twelve months (LTM) basis, with broad-based momentum across verticals and geographies, particularly in BFSI and communications. While revenue growth was modest, the substantial profit increase and strong deal pipeline offer a more optimistic outlook for Tech Mahindra.

HCLTech: Navigating Profit Dip with Revised Outlook

HCLTech reported a 9.7% YoY drop in consolidated net profit to ₹3,843 crore for Q1 FY26, primarily due to higher expenses and a one-time impact from a client bankruptcy. However, revenue from operations grew a healthy 8.1% to ₹30,349 crore, driven by strong performance in its Services business (4.5% YoY growth in constant currency). Notably, HCLTech revised the lower end of its FY26 revenue growth outlook to 3-5% in constant currency, citing a stable demand environment and expectations of stronger deal bookings. CEO C Vijayakumar highlighted the strong resonance of their AI offerings with clients, further strengthened by a partnership with OpenAI. The company also announced a restructuring program aimed at improving structural agility and returning to its target 18-19% margins.

The Road Ahead: Cautious Optimism Amidst AI Infusion

The Q1 FY26 results from India’s IT majors paint a picture of resilience in a challenging global landscape. While revenue growth remains largely subdued across the board, the emphasis on large deal wins, cost efficiencies, and strategic investments in cutting-edge technologies like GenAI is a common thread. The industry is clearly in a transitional phase, where the initial hype around AI is beginning to translate into tangible client engagements, albeit with a lag in top-line impact.

The ability of these companies to convert their strong deal pipelines into revenue, effectively manage operating margins amidst rising costs and GenAI investments, and adapt to evolving client demands will be crucial in determining their performance in the coming quarters of FY26. While the macroeconomic headwinds are likely to persist in the near term, the strategic shift towards AI-led transformations and a disciplined approach to execution offer a foundation for gradual recovery and sustained growth in the long run.

Market this week

Source: BSE and NSE

• The Indian market saw its third consecutive week of correction, largely due to significant foreign institutional selling.
• Disappointing Q1 FY26 earnings from the IT and banking sectors, coupled with US trade agreement uncertainties, fueled the downturn.
• Positive economic news, including an above-normal monsoon and historically low inflation (both retail and wholesale), was largely overlooked by the market.
• Foreign Institutional Investors (FIIs) continued their selling spree, divesting Rs 6,671.57 crore in equities.
• Conversely, Domestic Institutional Investors (DIIs) provided crucial support, extending their buying for the 13th week with purchases worth Rs 9,490.54 crore.

Weekly Leaderboard

Source: BSE

Stocks that made the news this week:

Indian solar module manufacturers experienced a drop in their share prices on July 18, following new trade petitions filed by their US counterparts against India, Indonesia, and Laos. The Alliance for American Solar Manufacturing and Trade, which includes prominent US firms like First Solar and Qcells, accused these countries of “dumping” cheap solar goods onto the American market, thereby undercutting newly established US factories. The American companies allege that their foreign rivals receive unfair government subsidies and sell their products below the cost of production in the US, hindering the growth of domestic solar manufacturers.

In contrast, Godrej Properties extended its winning streak for a fifth consecutive session on July 18, with its shares rising to Rs 2,358 apiece. This surge followed the company’s announcement of acquiring a 48-acre land parcel in the Doddaballapur micro-market of North Bengaluru, Karnataka. Over the past five trading days, the real estate company’s stock has gained 6 percent, significantly outperforming the Nifty 50 index which saw a 0.5 percent decline. The acquired land, located near the Satellite Town Ring Road (STRR), is designated for plotted units with an estimated development potential of around 1.1 million square feet.

Meanwhile, ICICI Bank, India’s second-largest private sector lender, reported robust financial results for the fiscal first quarter. On Saturday, the bank announced a 15 percent year-on-year increase in net profit, reaching Rs 12,768.21 crore, comfortably beating analyst expectations. The Net Interest Income (NII) for the June quarter, which is the difference between interest earned and interest expended, stood at Rs 21,634.46 crore, marking an 8.4 percent year-on-year increase. These figures surpassed a Moneycontrol poll’s projections, which anticipated an 8 percent YoY growth in NII to Rs 21,091 crore and a 9.5 percent rise in net profit to Rs 12,112 crore