New Delhi, April 2 The Indian IT services sector is projected to clock mid-single-digit USD growth over the medium to long term, led by 2-3 per cent market growth and the rest through market share gains, HSBC Research said on Wednesday.
Even in FY26, “we expect 4-5 per cent growth across large companies, led by a low base of two years and stability in the macro-outlook in the US and European market through the year,” the report mentioned.
The report expects the GCC headwind to continue and GenAI to be net negative (marginal). Given 4-5 per cent dollar growth and 3-4 per cent INR depreciation, “we expect 7-9 per cent EPS (earnings per share) growth over FY25-27.”
IT sector fortunes are highly linked to the US macro-environment.
Driven by the volatility, the analysts expect companies to keep a cautious tone for the 2025 outlook -- especially on the "flow business".
Assuming the worst-case scenario, “we believe Infosys and HCLTech both could provide 2-5 per cent growth guidance for FY26, factoring in a heightened macro weakness in the US at the lower end of guidance”.
Wipro's Q1 2026 guidance could be 0-2 per cent. Positively, in our view, while "flow business" is tough to predict and is uncertain, large deal activity has not moderated so far, said the report.
The Q4 of FY25 is likely to be a weak quarter, impacted by usual seasonality and sustained weak Europe performance and now uncertain US results.
“The macro-outlook (both in the US and Europe), GCC competition and GenAI impact on demand and pricing will be key topics of discussion,” said the report.
According to another report by BNP Paribas India on the India IT services sector, some of the US macroeconomic data have started showing signs of a slowdown, raising the risk of a stagflation at best and a recession at worst.
“In our large-cap coverage, we expect a flat to c1 per cent quarter-on-quarter CC revenue decline. We see our mid-cap coverage delivering stronger growth, led by Persistent Systems. We expect EBIT margin to remain largely flattish q-q for most of our coverage, while some firms may see a compression on account of deal ramp downs and wage hikes. We see companies building some caution in their FY26 guidance,” said the BNP Paribas India report.
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