India’s top IT firms, including Wipro, TCS, and Infosys, are bracing for a tough fiscal year in 2026. A recent report from Reuters highlights the struggle these companies face due to declining client spending, particularly in the United States. Analysts are pointing to signals from global tech leader Accenture, which suggests continued caution regarding IT budgets and delays in decision-making processes. This trend could significantly hinder the short-term recovery of the IT sector.
Ongoing Demand Challenges
Accenture, a key barometer for the global IT landscape, recently disclosed in its quarterly update that discretionary spending remains limited. The company has observed a rise in cancellations of new deals and notable delays, especially within the US market. Clients are tightening their budgets amid economic uncertainty and escalating trade tensions. Julie Spellman Sweet, CEO of Accenture, has attributed part of this slowdown to the previous administration’s initiatives aimed at government efficiency.
- Limited discretionary spending
- Cancellations and delays in new deals
- Tightened budgets due to economic uncertainty
Uncertainty Looms Over Recovery
Amit Chandra, Deputy Vice President at HDFC Securities, expressed to Reuters that recent developments have heightened uncertainties surrounding the first half of FY26. He noted, "It has become increasingly unclear whether a recovery will materialize at all this fiscal year."
The Indian IT index has plummeted by over 15% this year, marking its most challenging quarter since mid-2022. Major players like HCL Tech, TCS, Wipro, and Infosys have experienced significant stock declines, ranging from 11% to 18% since January.
Analysts Predict Modest Growth
According to Citi Research, India’s IT firms are projected to see only 4% revenue growth in FY26, mirroring the lackluster performance of FY25. Meanwhile, Morgan Stanley has cautioned that growth estimates may be further impacted by cautious client spending and a volatile global economic outlook.
Additionally, analysts from Kotak Institutional Equities have warned that a weak flow of large deals in FY25 is likely to adversely affect revenues in FY26. The early adoption of generative AI tools could also pose short-term challenges as companies adapt to new delivery models.
Sector Recovery and Client Behavior
While sectors such as banking and healthcare are beginning to show signs of recovery, clients across various industries are still hesitant. Chandra remarked, "There’s a definite shift to a wait-and-watch outlook,” indicating a cautious approach as businesses navigate uncertain economic waters.
The Indian IT industry is at a crossroads, grappling with external pressures and internal adjustments. While hope remains for sectors to rally, the path to recovery appears fraught with challenges that companies must navigate strategically.
