As the financial landscape evolves, mid and small-cap IT services companies are leaving their larger rivals in the dust. This trend, which began to take shape during the fourth quarter and throughout the entire fiscal year 2025, is expected to persist into fiscal year 2026. Traditionally, the industry has been dominated by heavyweights like Tata Consultancy Services (TCS), Infosys, and HCL Technologies, but the current dynamics suggest a significant shift.

Impressive Growth Among Mid-Tier IT Firms

The fiscal year 2025 saw remarkable revenue growth among companies such as Coforge, Persistent Systems, Hexaware Technologies, and Mphasis. Their growth rates ranged from 7% to 32%, while larger firms struggled to keep pace with modest increases of about 4%. Notably, Wipro experienced a decline of 2% in revenue. The disparity was particularly evident in the January-March quarter: Coforge’s revenue surged by 4.7%, reaching Rs 3,410 crore, while L&T Technology Services enjoyed a 12.4% rise to Rs 2,982.4 crore. In contrast, the larger firms reported mixed results, failing to meet revenue expectations despite securing substantial contracts.

Factors Driving Success for Smaller Firms

Analysts point to several reasons for the success of smaller IT companies. Their agility allows them to adapt quickly to emerging technologies like generative AI, which has become a game-changer in the industry. According to Kotak Institutional Equities, the disruptive potential of generative AI presents opportunities for nimble challengers while posing challenges for larger incumbents, who often struggle to realign their service portfolios.

Additionally, leadership consistency has played a pivotal role in the success of mid-sized firms. Many of their CEOs have been in place for over five years, ensuring a steady vision and strategy. In contrast, major players are currently facing leadership transitions, with TCS appointing K Krithivasan in June 2023, Tech Mahindra introducing Mohit Joshi in December 2023, and Wipro selecting Srinivas Pallia as its new CEO in April 2024.

Coforge Leads the Charge

Among the mid-tier firms, Coforge stands out as a strong performer, with projections indicating a 20.8% growth in organic constant currency revenue for FY26, up from 16.4% in FY25. CEO Sudhir Singh expressed optimism about the company’s future, citing robust order inflows and increasing deal sizes. In Q4 FY25, Coforge secured $2.1 billion in new orders, including five significant contracts across major global markets. Remarkably, it emerged as the only Indian IT firm to clinch a $1.56 billion, 13-year mega deal with US-based Sabre.

Larger Firms Face Challenges Ahead

As fiscal year 2026 approaches, large-cap firms are entering on a cautious note. Despite having a healthy pipeline of deals, economic uncertainties—including tariff fluctuations in the US and weak discretionary spending—have led to conservative revenue projections. Executives from TCS, Infosys, Wipro, and HCLTech have adopted a “wait-and-see” approach as clients remain hesitant in their decision-making processes.

Hiring Trends Reflect Market Sentiment

Hiring trends further illustrate the divergence between large and mid-sized firms. In Q4 FY25, Infosys, TCS, and Wipro reversed previous reductions by increasing their workforce. HCLTech experienced an annual dip in headcount due to a divestiture but added over 2,600 employees in the final quarter. Meanwhile, mid-sized companies are focused on recruiting fresh graduates while simultaneously embracing automation to enhance efficiency.

In summary, the IT sector is witnessing a significant transformation as smaller firms capitalize on their agility and stable leadership, positioning themselves for sustained growth against a backdrop of uncertainty for larger competitors.