IT majors see strong deal pipeline but revenue momentum cools in Q4

ET Intelligence Group: A cursory look at the March 2026 quarter performance of the top IT players suggests steady momentum in new deal flows and resilient operating margins. What it masks, however, is a gradual weakening in sequential quarterly revenue growth driven by delayed project rollouts.

For instance, Infosys and HCL Technologies (HCLTech) reported their strongest three-year top line growth of 4.6% and 6% respectively in dollar terms for FY26. However, both posted a worse-than-expected sequential decline of 1.2% and 2.9% in fourth quarter revenue in that order. Analysts had anticipated a drop of under 1% in each case. At Tata Consultancy Services (TCS), annual revenue contracted 0.5% in FY26, marking its first ever decline since public listing in 2004.

AI disruption risk
Apart from the tapering in quarterly topline performance, another concern is that the top IT pack’s best multi-year annual revenue growth has now slipped to the mid-single-digit range. That makes the talks of deflation or cannibalisation of revenue by the ever-advancing capabilities of artificial intelligence (AI) models and agents real. In that case, investors would want to find out whether the stock valuations of the IT exporters have been adjusted enough.The trailing price-earnings (P/E) multiples of the top IT companies including TCS, Infosys, HCLTech and Wipro have been gradually falling over the past decade. After staying in the mid-to-high 20s, the P/Es have now dropped to around 20 or lower. Can they fall further?

Weak guidance signals
The revenue forecasts by some of the companies may offer some cues. The FY27 guidance issued by Infosys and HCLTech and for the June quarter issued by Wipro looks less than encouraging. HCLTech guided 1.5-4.5% growth for services revenue, almost half of what the street was expecting. For Infosys too, the guidance of 1.5-3.5% revenue growth for FY27 was below the expectation of 3-5% growth. Wipro guided for either a flat revenue or a 2% drop on a sequential basis for the first quarter of FY27 amid slower project ramp ups.

To be sure, Infosys has historically chosen to err on the side of caution while issuing guidance. For instance, it had guided a 0-3% growth at the beginning of FY26, which was gradually revised to 3-3.5% growth by January 2026 and it eventually delivered 3.1% growth in constant currency. It will be too early to predict whether the company will be able to raise its FY27 forecast during subsequent quarters; that will depend upon the momentum in project rollouts and the pace of decision making by clients.In the short term, the IT stocks are expected to remain under pressure and may show an intermittent uptick, depending upon the extent of the weakness in rupee against the dollar.