FY26 likely to remain weak for IT majors, expect revival in FY27, says HSBC; mid-cap firms to remain robust

Top Indian information technology (IT) companies are likely to report a flat-to-positive revenue growth in the first quarter of the current financial year (Q1 FY26), HSBC said in a report.

HSBC expects IT companies to report 0%-1% revenue growth sequentially in constant currency terms, which will be better than feared post-Liberation Day pessimism with slightly improved demand commentaries.

HSBC said that this may be the start of the bottoming of the earnings downgrades cycle for IT companies.

"Growth for the sector has been low single digits in the past two years (FY24/25), owing to a high base, GCC expansion, GenAI ambiguity and, above all, weak/uncertain macro. FY26 is likely to be weak as well due to tariff impact. We maintain our long-standing expectation of 4-5% CAGR sector growth over the medium-to-long term. With a low base of three years (FY24-26), we expect a revival in FY27," HSBC said in a note to its clients.

HSBC expects Infosys and HCL Technologies to maintain their full-year outlook. Infosys' FY26 revenue growth guidance was 0%-3%, while HCL Technologies guided for revenue growth of 2%-5%.

Wipro is likely to give another soft guidance for the second quarter, and HSBC expects the business outlook to improve for the company from the third quarter.

HSBC noted that the majority of IT companies have alluded to a strong pipeline led by vendor consolidation deals, but these deals find presence in the pipeline of every company.

Q1 revenue preview

HSBC said, "We expect deal momentum to improve from 2Q as some of the slipped deals in 4QFY25 and even in 1QFY26 may come through going forward. We worry for the banking sector outlook, though, which has been the key optimistic vertical in the past six months. Growth is likely to remain strong for mid-tier, and we expect growing focus on cash flows by investors for mid-tier now."