India’s IT Firms Brace for Sluggish Q1 FY27 amid AI Spending

India’s leading IT firms are expected to report another weak quarter, Q1 FY27, in July 2026 for the April-June period.

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With analysts forecasting subdued revenue growth amid cautious client spending, increasing investments in artificial intelligence (AI), and an uncertain global economic environment.

According to a report by brokerage Systematix Research, the June quarter is likely to reflect continued pressure on the sector as enterprises remain selective in technology spending.

Also Read: Salary Gap Widens in India’s IT Sector- Report

While AI continues to attract higher investments, spending on traditional IT services has slowed, affecting demand for outsourcing projects.

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AI and GCCs Changing Spending Priorities

The report noted that global enterprises are increasingly allocating technology budgets towards AI initiatives and expanding Global Capability Centres (GCCs). This shift has reduced discretionary spending available for conventional IT service providers.

At the same time, macroeconomic uncertainty, geopolitical tensions, and a cautious business environment have delayed decision-making on large technology projects. Analysts believe these factors will continue to impact growth in the near term.

Systematix expects Tier-I IT companies to deliver annual revenue growth of between -1% and 5% over the next few years, reflecting a slower growth cycle compared to previous years.

Large IT Firms May Post Flat Performance

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The brokerage estimates that major IT companies could report constant currency revenue growth ranging from a decline of 1.8% to an increase of 1.1% on a sequential basis during the June quarter.

Also Read: Centre Plans PM Internship Scheme Revamp, Eyes SEZs and GCCs

Among individual companies, Infosys is expected to raise the lower end of its FY27 revenue growth guidance to 2.5-3.5%, supported partly by acquisitions.

HCLTech is likely to maintain its existing guidance, while Wipro may forecast September-quarter revenue growth in the range of -1.5% to 0.5% in constant currency terms.

In contrast, mid-sized IT companies such as Persistent Systems and Mphasis are expected to perform better than their larger peers, supported by stronger execution and relatively resilient demand in niche segments.

Margins to Remain Under Pressure

Apart from slow revenue growth, profitability is also expected to face pressure. Wage revisions, continued investments in AI capabilities, restructuring expenses and cross-currency headwinds are likely to weigh on operating margins during the quarter.

Analysts also expect net profit growth to remain modest, broadly in line with revenue performance.

Despite the weak near-term outlook, experts believe the recent correction in IT stock valuations has made the sector more attractive for long-term investors.

However, a meaningful recovery is expected only when discretionary technology spending improves and AI-related opportunities begin translating into higher revenues for IT service providers.

Key Highlights

• Indian IT companies are expected to report another muted quarter in Q1 FY27.
• AI investments and GCC expansion are reducing spending on traditional IT services.
• Large IT firms are likely to post flat or marginally negative sequential revenue growth.
• Mid-sized IT companies are expected to outperform larger peers.
• Wage hikes, AI investments and currency headwinds may keep margins under pressure.

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