The June-quarter earnings season will begin this week, with tech companies led by TCS set to roll out their numbers. Street expectations remain muted as macroeconomic uncertainty, AI-led disruptions, and geopolitical overhangs continue to weigh on discretionary spending and decision-making cycles.
Q1 FY27 is typically a seasonally strong quarter, but management commentary during the final quarter of last fiscal year pointed to a soft start to FY27, driven by disruptions arising from the Middle East conflict and ongoing AI-led pricing deflation.
That said, the first quarter is likely to be weaker than initially anticipated. Furthermore, Accenture’s Q4FY26 commentary (which corresponds to Q2FY27 for Indian IT services, another seasonally strong period) indicates a risk of further earnings downgrades in Q2FY27.
Against this backdrop, investors will closely watch companies’ FY27 guidance and demand outlook, domestic brokerage firm JM Financial said.
JM Financial sees muted growth for large cap IT
JM Financial said it expects Q1 FY27 constant currency (CC) IT services revenue growth of 0.7% to 6.6% YoY (-1.2% to 2% QoQ, including acquisitions) for the top six companies, impacted by macro uncertainty and AI productivity despite a seasonally strong quarter. Among individual companies, it expects Tech Mahindra and Infosys to post better performance.
The brokerage added that for the mid-tier Indian IT companies (Mphasis, Coforge, Persistent Systems, and Hexaware), it estimates CC revenue growth of 6.7% to 16.2% YoY (0.3% to 5% CC QoQ, including acquisitions), led by Hexaware.
Among the ER&D names, JM Financial expects Tata Technologies to perform well, with 2.4% CC QoQ revenue growth for services. The brokerage further said the BPO cohort continues to deliver as expected, with Sagility likely to report 14.2% YoY growth in Q1.
It also noted that the Indian rupee’s nearly 3% QoQ depreciation is likely to partially offset margin pressure despite competitive intensity and AI-driven productivity gains.
Motilal Oswal expects Infosys to lead large-cap growth
Similar to JM Financial, Motilal Oswal also expects a mixed performance from large-cap IT companies in Q1FY27.
The brokerage said TCS and LTIMindtree are likely to report flat quarter-on-quarter (QoQ) constant currency (CC) revenue, while Infosys is expected to lead large-cap growth at around 2.0% QoQ CC (organic growth of around 1.0% QoQ CC), supported by acquisitions.
Tech Mahindra may deliver around 1% growth on telecom deal ramp-ups, whereas HCL Technologies and Wipro are expected to report declines due to client-specific issues, delayed ramp-ups, and seasonal weakness.
Among mid-tier IT firms, Motilal Oswal expects Hexaware Technologies to lead with around 4.8% QoQ CC growth, followed by Persistent Systems (3.0%), Mphasis and Tata Technologies (~2.0% each), while Coforge and Zensar Technologies are likely to remain flat.
Among the ER&D companies, the brokerage expects LTTS and Tata Technologies to benefit from deal ramp-ups, while Tata Elxsi is likely to report around 1.2% QoQ CC growth driven by a recovery in the healthcare and media verticals. Cyient DET is expected to decline around 1.0% QoQ CC as deal conversion remains gradual.
Motilal Oswal also expects cross-currency headwinds of around 20-50 basis points on a sequential basis across its coverage universe during the quarter.
To reflect the slower growth, the brokerage cut its target multiples by 15-20% across most of its coverage amid increasing uncertainty around AI-led productivity and geopolitical overhang.
Despite the meaningful correction in valuations, the brokerage believes a sustained re-rating will require evidence that demand is improving, revenue growth is stabilising, and companies can demonstrate that AI-led opportunities are beginning to offset productivity-related headwinds.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
