Indian IT firms face muted Q1 as AI shift, weak demand weigh

India's IT sector likely saw a weak April-June quarter, delaying hopes of a broader recovery

India's top information technology companies are expected to report another subdued quarter, as AI-driven pricing pressure, weak client spending, and global geopolitical turmoil continue to weigh on growth, nine brokerages said.

The April-to-June quarter is usually a strong one for ​India's $315 billion IT sector, helped by higher billing days and new project starts, but analysts expect a ​slow start to the fiscal year that would push back hopes of a recovery.

India's ⁠largest IT services company, Tata Consultancy Services , kicks off earnings on Thursday with peers Infosys , HCLTech  and Wipro  ​reporting later this month.

While India's top six IT firms are expected to report around 14% year-on-year revenue growth in ​rupee terms with net profit rising 12%-13%, this would largely be due to the impact of sharp rupee depreciation. Stripping out exchange rate effects, the companies are expected to post a mere 2.8% revenue growth in constant-currency terms.

Citi expects a fourth straight year ​of subdued growth for Indian IT firms, while JPMorgan sees revenue growth staying below 3%-4% for the "foreseeable future".

The ​IT sector is racing to adapt to changing customer needs as companies across the globe step up the use of AI ‌tools and ⁠agents to cut costs and quicken software development cycles.

Software firms have slowed hiring, with TCS Chairman N Chandrasekaran saying the "day is not far" when the company would have an equal number of AI agents and employees.

Indian IT firms are in a "perfect storm," Nomura said in its earnings preview, with Middle East conflict-led uncertainty compounding AI-driven pricing pressure.

Fears ​that AI would disrupt the ​IT sector's traditional, labour-intensive ⁠business model dragged the Nifty IT index  down 9.5% in the June quarter even as India's benchmark Nifty 50 gained 6.9%.

Read More: UN's Guterres warns AI outpacing oversight, urges global rules to protect children

The IT index has slumped about 28% so ​far in 2026, making it the worst-performing major sector in India.

The impact of AI-led ​disruption and ⁠weakness in client spending will be broad-based, according to PL Capital, with effects visible in the consumer, hi-tech, and telecom verticals.

"Slower decision-making and elongated sales cycle are leading to delays in revenue conversion and execution," the brokerage said in a ⁠note.

Annual ​revenue forecasts will be a key focus for investors. Brokerages say Infosys ​and HCLTech could narrow or trim the upper end of their forecasts.

Potentially higher interest rates in the US, which makes up about 60% ​of Indian IT firms' revenue, also loom.