India’s information technology (IT) sector is expected to report another slow and cautious performance in the December quarter, according to multiple brokerage firms. Weak demand from the United States, holiday-season shutdowns, and continued global uncertainty are limiting growth opportunities for the country’s top software exporters.

The US remains the largest revenue contributor for Indian IT companies. As American businesses cut or delay technology spending due to economic concerns, Indian IT firms are directly affected. This dependence makes the US economy a crucial factor in deciding the future of India’s IT sector.

Modest Growth Expectations

Brokerages estimate that the top six Indian IT firms will record:

• Around 4% year-on-year revenue growth, and
• About 5% profit growth for the December quarter.

This performance reflects prolonged demand softness, especially when compared to the stronger 6.5% revenue growth in the September quarter. The numbers show that although growth continues, it is far from strong or stable.

Indian software exporters last achieved double-digit revenue growth in March 2023, when global companies rapidly invested in digital transformation, cloud adoption, and remote-work technologies in the post-pandemic period. Since then, client spending has slowed significantly.

Structural Challenges for IT Firms

The December quarter is traditionally weak for IT companies due to:

• Fewer working days caused by global client holidays
• Lower project activity and billing
• Delayed deal execution

In addition, brokerages warn of margin pressure due to:

• Employee furloughs
• Wage hikes at companies like TCS and Wipro

These factors reduce profitability even when revenue grows slightly.

Impact of Global Headwinds

India’s $283 billion IT industry is facing several macroeconomic challenges:

• Uncertainty over US tariff policies
• Concerns over proposed $100,000 visa fees, increasing operational costs
• Weak client spending due to fears about US economic growth

These concerns led to record foreign outflows of $8.5 billion from IT stocks in 2025, which accounted for nearly half of all foreign exits from Indian equities. As a result, the Nifty IT index fell 12.6% in 2025, making IT the worst-performing sector in the Indian stock market.

Company-wise Outlook

The earnings season begins with Tata Consultancy Services (TCS) on January 12. Brokerages expect:

• TCS: 4.2% revenue growth (vs 5.6% last year)
• Infosys: 8.1% revenue growth (vs 7.6% last year)
• HCLTech: 4.6% revenue growth (vs 5.1% last year)

Most brokerages do not expect Infosys or HCLTech to raise their FY2026 revenue guidance, showing management caution about future demand.

AI: A Hope for Future Growth

Although India does not yet have pure-play AI companies, IT firms are slowly building AI capabilities through acquisitions and partnerships. AI-related demand is beginning to improve, and brokerages expect stronger momentum over the next six months, with better demand conditions possibly extending into 2026.

However, Abhishek Pathak of Motilal Oswal Financial Services notes that clients remain cautious about committing large budgets due to ongoing macro and tariff uncertainty and the early stage of the new technology cycle.

Mixed Outlook Ahead

While IT firms struggle, overall corporate earnings in India are expected to improve in the December quarter due to:

• Tax cuts
• Policy easing
• Stable growth
• Low inflation

For IT companies, support may come from:

• Strong demand from the BFSI sector
• Gradual deal ramp-ups
• Formation of AI strategies
• A weaker rupee, which boosts export earnings

Brokerages believe these factors could help the sector stabilize by mid-2026, though a strong recovery is still some distance away.

Key Points

• Indian IT firms face another muted December quarter due to weak US demand.
• Revenue growth for top IT firms is expected at around 4% year-on-year.
• Profit growth is estimated at about 5%.
• IT last saw double-digit growth in March 2023.
• US tariffs, visa concerns, and weak spending hurt investor confidence.
• Foreign investors withdrew $8.5 billion from IT stocks in 2025.
• Nifty IT fell 12.6%, making it the worst-performing sector.
• AI offers future growth, but large client spending remains cautious.
• BFSI demand, deal ramp-ups, and rupee depreciation may support recovery by mid-2026.

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