A recent assessment of India’s IT services industry highlights a mixed performance trend in Q4FY26, with mid-tier companies outperforming larger peers as artificial intelligence-led transformation and global macroeconomic pressures reshape client spending patterns, according to a UBS report.
The report noted that after two consecutive quarters of earnings beats, the sector saw more misses than expected in Q4FY26, particularly among large-cap IT firms.
It stated, “Clear divergence between mid-tier and large-cap companies… Q4FY26 prints were mixed, with more misses than beats.”
UBS observed that major players including Infosys, HCL Technologies, and Wipro delivered weaker-than-anticipated results and issued cautious revenue growth guidance for FY27.
Infosys projected FY27 revenue growth of 1.5–3.5 percent year-on-year in constant currency terms, while HCL Technologies estimated 1.5–4.5 percent growth for its services business, both below market expectations.
The report said management commentary reflected caution due to AI-driven pricing pressure and weak discretionary client spending. It also added that consensus earnings estimates have been trimmed slightly, with EPS cuts of 0–3 percent across most large-cap IT companies for FY27 and FY28.
In contrast, mid-tier firms showed stronger momentum. Coforge stood out with improved performance, prompting UBS to raise its price target by 21 percent. The company reported margins of 16.6 percent in Q4FY26 and guided for 16.5–17 percent in FY27.
Persistent Systems and Mphasis also maintained steady growth supported by strong deal wins.
UBS noted that the broader macro environment remains weak, with geopolitical uncertainty and tight IT budgets continuing to weigh on discretionary enterprise spending.
At the same time, companies are increasingly prioritising investments in AI, cloud adoption, and digital modernisation, while focusing on cost efficiency and productivity gains.
Sector-wise, BFSI and manufacturing segments remained relatively stable, supported by AI-led demand, while retail and communications continued to face pressure.
Regionally, Europe emerged as a relative bright spot, while the Americas remained stable on the back of consistent deal activity. UBS added that AI initiatives have now become central to long-term growth strategies across the IT services landscape.
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