Coforge, Persistent Systems, TCS: How are mid- and large-cap IT firms expected to fare in Q3 FY26? Key points to know

Data show that the NIFTY IT index has risen by over 11% over the past three months. In comparison, the benchmark NIFTY50 index has gained around 5.5% (data as of the January 5 closing level).

HSBC, in its latest report, said that it had expected the IT sector to outperform the broader market in 2026 due to expectations of a recovery in growth, more reasonable valuations, a favourable base after three years of weak performance, and easing concerns around the impact of artificial intelligence.

However, IT stocks have already seen an impressive rally between October and December 2025.

As a result, much of the expected improvement in fundamentals for 2026–27 appears to be already priced in. While the outlook for the sector continues to improve, analysts now expect IT stocks to perform broadly in line with the overall market in FY27.

CLSA, according to news reports, has also estimated soft numbers from the IT services firms for Q3 FY26.

Q3: Seasonally weak quarter

The Q3 quarter is already a seasonally weak quarter due to furloughs and holidays.

Analysts tracking the sector believe the impact of furloughs and holidays in Q3 is likely to be similar to that seen last year. Demand beyond essential services or in select pockets has also not shown any significant change during the period.

Q3 is expected to have a greater influence on topline growth, as BFS typically sees the usual impact of furloughs compared with other verticals. At the same time, BFS remains the only silver lining amid a challenging macroeconomic environment.

IT no longer long-term double-digit compounding sector

Analysts at HSBC, in their report dated January 1, 2026, noted that IT is no longer a long-term double-digit compounding sector, with the long-term stock return trajectory gradient lower than in the past.

"We also expect stocks to be a lot more cyclical around this mean path. Hence, top-tier IT stocks require a lot more active management around their cycles/volatility. With a possible cyclical rebound in 2026/FY27, IT stocks could have further to run on top of recent performance, in our view," the investment firm added.

What to expect in Q3 FY26?

Analysts expect Tier-2 and smaller IT firms to outperform large-cap peers during the quarter under review. Analysts at Elara Capital expect Coforge and Persistent Systems to post strong QoQ USD revenue growth of 3%+.

LTIMindtree and Mphasis should follow, with USD revenue growth of around 1.0-2.0%, they note.

Coforge may see revenue growth of 3% QoQ in USD terms, led by strong deal execution in all the verticals, except BFSI, which may see furlough impact in Q3. Expect Persistent Systems to post QoQ growth of 3.0% in USD terms, aided by continued strong performance in BFSI and hi-tech.

Mphasis Limited’s revenue may grow nearly 1% QoQ, led by Media & Telecom and Insurance (BFSI may see furlough impact). LTIM may post 2% QoQ USD growth, led by manufacturing and retail, while BFSI may be hit by furloughs.  

Large-cap peers

Among large caps, excluding HCL Technologies, companies may post a QoQ revenue growth of -0.5 to +0.5% in USD.

TCS is expected to report flat quarter-on-quarter (QoQ) growth in dollar terms, as the impact of furloughs in international markets is likely to be offset by growth in its India business.

Infosys may see a 0.5% QoQ decline in dollar revenue due to seasonal furloughs, in line with its recent trend of weaker performance in the second half compared with the first half. Analysts expect the organic sequential decline to be sharper.

Wipro is expected to report a 0.5% QoQ growth in dollar revenue, around the midpoint of its guidance range of -0.5% to 1.5% for the third quarter, supported by the ramp-up of the Phoenix deal.

HCL Technologies may post around 2% QoQ growth in constant currency terms, or about 2% in dollar terms, driven by seasonally strong performance in its Products and Platforms business and some recovery in retail, consumer packaged goods and healthcare.

Tech Mahindra is expected to report a 0.5% QoQ increase in dollar revenue, led by growth in the communications and retail segments.

Tata Elxsi may report around 1.5% QoQ growth in dollar revenue, supported by a recovery in the auto segment due to spillover from the previous quarter and improved performance in media and entertainment, while healthcare is expected to remain muted.

IT sector: Other key points

HSBC said that Q3 has been impacted by seasonal weakness and is unlikely to provide any positive surprise.

Accenture’s 1QFY26 results were better than expected, but the company didn’t raise full-year guidance. HSBC expects to hear some positive sector commentary for next year. Cognizant Technology Solutions (CTSH) will provide CY2026 guidance – the investment firm anticipates 4-5% growth in organic constant currency (CC) terms.

"Wipro’s Q4 guidance may finally allude to some improvement in growth. HCLT’s 3Q will be strong, in line with its guidance, while we think Infosys is unlikely to change guidance, unlike last year. Hexaware may provide an outlook for CY2026, potentially alluding to stronger performance than in CY2025," HSBC added.

Deal wins

Deal wins are expected to remain steady, with renewals making up a larger share of total contracts. Analysts do not see any major change in deal activity linked to cost optimisation or vendor consolidation programmes.

Conclusion

Growth in the IT sector could improve in FY27, as commentary from industry customers indicates better confidence in the business outlook and a greater willingness to increase spending on IT services.