India’s top IT firms face FY26 test amid slow growth, AI deflation and visa pain

The big five had their weakest year in recent memory in FY25, with two reporting revenue declines and overall growth not exceeding 4.5%. Much of this was because of fewer mega deals, low demand for IT work, and geopolitical tensions prompting clients to go slow on IT spending.

Of the five, Infosys and HCL Technologies have grown their revenue in the first six months of FY26 year-on-year. Tech Mahindra’s revenue growth has been flat, whereas Tata Consultancy Services (TCS) and Wipro have lost business in the same period.

Second-largest Infosys’s 4.26% dollar revenue growth in April-September 2025 was faster than the 2.92% growth in H1 of FY25. But third-largest HCLTech’s revenue growth slowed from 5.98% in the first half of FY25 to 5.58% this year, although it still recorded the highest growth among its peers.

Market leader TCS saw its revenue decline 1.9% in April-September compared to a jump of 5% in H1 FY25, while fourth-largest Wipro saw revenue decline 1.78% in the first half of this year, which was lower than a 3.75% decline in the year-ago period.

Although fifth-largest Tech Mahindra’s revenue inched up 0.06% compared to falling 0.25% last year, incremental revenue was marginal at $2 million in April-September 2025.

Even headcount addition, which is a leading indicator of demand for IT services, has been lesser than last year.

Since the start of the year, shares of TCS, Infosys, HCLTech, Wipro, and Tech Mahindra have fallen 27.69%, 23.36%, 22.46%, 20.25%, and 15.13%, respectively.

Growth concerns

Experts said these companies have an uphill mountain to climb as tightening visa norms in their largest market—the US—tariff-related disputes and Gen AI-led deflation threaten growth and client spending.

For instance, TCS, which ended FY25 with $30.18 billion in revenue, will need to add $15.29 billion in October-March, or $7.65 billion each quarter, to match last year’s performance. This translates to a 2.4% sequential jump in revenue for the third quarter (October-December 2025), which would also be its fastest in three years.

TCS chief executive K. Krithivasan’s outlook on uncertainty in the demand environment further raises concerns, despite the company announcing a $6-billion push in building and running AI data centres.

Then, Bengaluru-based Infosys, which ended last year with $19.28 billion in revenue, an increase of 4.2% in constant currency terms, expects revenue growth of 3% at best in FY26. Constant currency does not take currency fluctuations into account.

However, Noida-based HCLTech has estimated it will grow revenues at 5% this year at best, which would be an improvement over the 4.7% growth it recorded last year to reach $13.84 billion in revenue.

Both Wipro and Tech Mahindra, which ended FY25 with revenue declines, are cautious of the future, although they are expected to perform better than last year.

To be sure, Infosys and HCLTech are the only two companies that give full-year guidance.

Big deals happening, but…

This outlook comes despite three of the country’s big five winning deals valued at more than $500 million each. On 2 September, TCS announced a $640-million IT modernisation order from Danish insurer Tryg.

Infosys ended a two-year mega deal drought on 14 October after it bagged a $1.6 billion contract over a 15-year period with NHS, UK’s publicly-funded healthcare provider. As part of the deal, Infosys would build and manage a workforce management system for the healthcare provider.

Cross-city rival Wipro Ltd was not far behind. In March this year, Wipro won a 10-year contract valued at $650 million from UK-based insurance company Phoenix Group. As part of the deal, it would manage the insurer’s customer support, claims processing, policy administration, and data management.

Factors impacting growth

Traditionally, the second half of a fiscal (October-March) is seasonally weak because of fewer working days, which leads to lesser billings. The added threat of automation tools eating into the revenue of IT outsourcers is another concern.

“We expect an 8-10% negative impact on revenues in Indian IT due to adoption of AI tools across the technology stack over 3-4 years, although AI could be accretive to growth in the medium to long-term,” said HSBC analysts Yogesh Aggarwal, Prateek Maheshwari, and Sagar Desai, in a note dated 13 October.

Meanwhile, US President Donald Trump’s executive order raising new H-1B visa application fees to $100,000 is expected to hurt the country’s IT sector.

“The steep hike in H-1B visa fees makes it effectively unviable for Indian IT firms to send professionals onsite to service their US-based clients, except high-wage workers. Rising immigration restrictions will incentivize companies to change their service delivery models, ‘near-shore’ operations closer to the US and fast-track hiring of more US-based staff, which could add to staff costs and squeeze profit margins of Indian IT companies,” said Nomura analysts Sonal Verma and Aurodeep Nandi, in a note dated 25 September.

According to a Mint report dated 27 September, India’s share of H-1B visas was at a decadal low. Still, a third brokerage pointed to concerns surrounding operating margins for IT vendors.

“BI (Bloomberg Intelligence) analyst emphasized that (IT) vendors cannot economically absorb such costs without jeopardizing (operating) margins or contract profitability. The traditional labour arbitrage model, built on deploying Indian and Asian engineers onsite at US client locations, becomes financially non-viable under this policy,” said Philip Capital analysts Karan Uppal and Kunal Khandzode, in a note dated 13 October.

Profit sweetener

Notably, four of the top five — TCS, Infosys, HCLTech, and Tech Mahindra — managed to increase their profitability in July-September 2025 by 70 basis points, 20 basis points, 110 basis points, and 100 basis points to 25.2%, 21%, 17.4%, and 12.1%, respectively, thereby reaffirming their faith in profitable growth. Wipro’s margins fell 10 basis points to 17.2%.

A fourth brokerage said that companies would maintain their profitability in the near future.

“We expect flat margins across the next three years for the industry as well as INFO (Infosys), as pricing pressures in a muted demand environment and deflationary pressures could create headwinds. Currency is a mitigating factor, but risks skew to the downside,” said Motilal Oswal Financial Services analysts Abhishek Pathak, Keval Bhagat, and Tushar Dhonde, in a note dated 17 October.

Falling heads

A fourth challenge to homegrown IT outsourcers is the lower headcount addition. Cumulatively, the big five added 3,097 employees in H1 of FY26, a fall of 72% from 11,171 additions in the year-ago period. These are net numbers, including employee hirings and departures.

Individually, Infosys, HCLTech and Wipro added 8,413 employees, 3,220 employees, and 2,146 employees in the first half of the current fiscal, respectively. In comparison to the same time last year, Infosys and Wipro added (net) 548 employees and 1,315 employees, respectively.

HCLTech cut headcount by 8,860. Tech Mahindra added 3,983 people in this time, which was lower than the 6,990 people added in the first six months of FY25.

However, TCS was an outlier yet again, culling 14,665 jobs cumulatively. Much of this was on account of the layoffs announced by the company in July, where about 2% of its workforce in middle and senior levels would be let go. The IT outsourcer added 11,178 people in the first half of the last fiscal.

According to a fifth expert, IT services companies will refrain from bulk hiring.

“The productivity we are seeing from the new AI-based models require fewer, not more people. Hence, we will continue to see firms adding head count but also letting head count go,” said Peter Bendor-Samuel, founder of Everest Research.

A sixth expert voiced a similar perspective. “The big five are re-balancing the pyramid, adding selective headcount to build AI-ready delivery capacity, not to return to volume hiring,” said Phil Fersht, chief executive of HFS Research.