IT earnings recovery not quite made to order, but seen on track

ET Intelligence Group: The BSE Infotech index has budged little — a gain of 0.4% — since January 12 when Tata Consultancy Services (TCS), the country’s largest IT company, kicked off the latest result season for the sector. This is despite strong order bookings reported by the top five sector companies, including TCS, Infosys, HCLTech, Wipro and Tech Mahindra (TechM). The index has lost nearly 4% over the past month and around 11% over the past 12 months, reflecting the sombre mood among investors amid delays in project execution, which has slowed the revenue growth.

Analysts expect gradual recovery over the next few quarters amid large deal ramp ups and rising collaborations of Indian software exporters with global technology partners that is likely to help them take advantage of the increasing artificial intelligence (AI) related opportunities.

For the top five software exporters, the aggregate year-on-year incremental revenue on trailing 12 months (TTM) basis has been falling though the momentum in deal wins has remained intact. This reflects the slower execution of projects as clients take more time to decide on the business priorities in a fast-changing technological landscape. ₹The aggregate new deals won by the top five companies were at a three-quarter high of $21.5 billion in the December quarter, implying 13% growth form the year-ago quarter.

In the first nine months of FY26, these companies booked orders worth $63.5 billion based on the reported quarterly total contract value (TCV), showing a year-on-year growth of 16.3%. IF the sample companies can maintain the pace of deal bookings in the fourth and final quarter of the fiscal year then the TCV for FY26 may surpass the previous year’s tally of $77.1 billion.

What has spooked investors, however, is that the strong TCV traction has not yet resulted in accelerated top line growth. The incremental TTM revenue for the sample fell to $1.1 billion in the December 2025 quarter from $1.9 billion in the yearago quarter. After reaching $2.1 billion in the March 2025 quarter, it slid gradually in each of the three subsequent quarters. For the December 2025 quarter, TCS and Wipro reported a drop of $216 million and $148.8 million in the incremental TTM revenue respectively. In the case of TCS, it was the first ever drop while for Wipro, it was the ninth consecutive quarter of fall. On the other hand, Infosys and HCLTech recorded a year-on-year improvement in the incremental TTM revenue.

Analysts continue to retain buy/hold rating on the top tier companies citing a revival in the growth trajectory in coming quarters though the short-term trend will depend upon the geopolitical situation and global tariff related measures. Among the top companies, HCLTech looks well placed given its focus on technology platforms including enablers of artificial intelligence (AI).