Global macroeconomic headwinds, a once-in-a-generation technological shift, and a mercurial occupant of the White House – the Indian IT sector clearly has its plate full. The Q4FY25 earnings season has displayed all the pulls and pressures afflicting the country’s IT services industry as well as pockets of opportunity available for nimble players. Mint takes a look at IT companies’ Q4 numbers and what it means for investors.
How has the frontline IT companies’ performance been in Q4?
In one word, disappointing. IT sector bellwether Tata Consultancy Services (TCS) saw its revenue slip for the second straight quarter. This pulled down its full-year topline growth to 3.78%, its slowest in four years.
Infosys posted a sharp 4.2% sequential revenue decline, while consolidated net profit slumped 11.75% year-on-year to ₹7,033 crore. Wipro’s IT services revenue dropped 1.2% sequentially, while that of HCL Tech dipped 1%. Tech Mahindra posted a 1.2% fall in Q4 revenues.
Worryingly, the top three IT firms–TCS, Infosys and HCL Tech– suffered a drop in Ebit margins, while that of Wipro stayed flat. Tech Mahindra bucked the trend with a 30 bps q-o-q Ebit margin expansion. Ebit is earnings before income and tax.
Also Read: Mint Primer | Will IT get better or worse? TCS points to cautious growth ahead
Did the mid-cap IT players fare better?
Mostly yes. Persistent Systems clocked a robust 4.3% sequential growth in revenue at $375 million, and exuded confidence of expanding its topline from $1.4 billion in FY25 to $2 billion in FY26. Mphasis reported its highest quarter-on-quarter (QoQ) growth in three years. Oracle Financial Services saw its Q4 revenue rise 4% on-year to ₹1,716 crore and net income jump 15% to ₹644 crore.
KPIT Technologies reported a broadly in-line quarter, with revenues rising 0.7% sequentially. However, LTIMindtree posted a 0.7% decline in Q4 revenue at $1.13 billion, while that of Hexaware Technologies dipped 0.2% to $371.5 million.
What were the key reasons for the muted performance?
As highlighted by IT companies across the board, rising macroeconomic uncertainty and geopolitical tensions have emerged as key headwinds for global growth. US President Donald Trump’s tariff flip-flops, combined with a belligerent China’s refusal to back down from a trade war with the world’s largest economy, have ratcheted up risks of a global recession, impacting demand for IT services. Many clients in the US and EU – the major markets for India’s IT firms – are in a wait-and-watch mode.
Also Read: Inside Wipro’s smart factories: How AI is redefining manufacturing and the future of work
Are there any silver linings currently?
Despite the lacklustre show in Q4, deal wins have remained strong. TCS reported an overall deal total contract value (TCV) of $12.2 billion, a growth of 19.6% QoQ, while that of Wipro climbed 13% to $3.9 billion. Backed by a mega deal win, HCL Tech’s new deal wins soared 43% to $3 billion. Infosys’ large deal TCV increased 4.2% sequentially but declined 41.6% on-year.
Companies said while decision-making has been delayed in pockets, clients are not backing away from discretionary spending in crucial areas like artificial intelligence and automation. Also, major US banks, which are among the top clients of Indian IT firms, have reported robust results and maintained that tech spending remains a strategic priority. This can provide a fillip to companies with high exposure to the BFSI vertical, like Mphasis (59%), Coforge (51%), Zensar (40%) and LTIMindtree (36%).
Also Read: Big Four of Indian IT lose market share; HCL Tech’s outlook offers little relief
What is the outlook for the IT pack?
The near-term prospects remain challenging. Infosys expects 0-3% revenue growth in FY2026 – its weakest guidance since April 2009. Wipro guided for IT services revenue growth to be -3.5% to -1.5% in Q1FY26, its weakest ever QoQ growth (excluding covid and global financial crisis quarters).
IT stocks, which got significantly re-rated post-covid, have been underperforming for the last few months, which is bringing their valuations closer to 10-year averages. Also, analysts say the rise of new technologies like AI is reducing the incumbency advantage of IT majors, which presents entry opportunities for mid-cap companies.
