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TCS to Infosys: IT companies balance weak growth with dividends and buybacks
5 min read | Updated on October 21, 2025, 10:36 IST
SUMMARY
Despite sluggish Q2 earnings, major IT companies announced steady dividend payouts for their shareholders. Here is an overview of how these companies performed in recent years and have balanced shareholder returns despite weak revenue and profit growth.
Are IT firms masking their weak returns and earnings behind high dividend payouts and share buybacks?
First TCS, then HCL Technologies and now Infosys. Major IT stocks are once again in the spotlight for dividend payouts. Four out of the top five Tier-1 IT companies have announced interim dividends along with their second quarter earnings. These companies have maintained a reputation for high payouts via dividends and recurring share buybacks.
But what about the stock returns? Well, that doesn’t seem be favourable for investors of these companies. Most of the major top IT stocks are down between 15% and 26% year-to-date.
Are IT firms masking their weak returns and earnings behind high dividend payouts and share buybacks? Let’s explore.
Q2FY26 earnings overview
| Company | Corporate action | Revenue (in crore) | Net profit (in crore) | Q2 stock return |
|---|---|---|---|---|
| TCS | ₹11 per share | ₹65,799 (▲3.7% QoQ) | ₹12,075 (▼5.3% QoQ) | ▼16.5% |
| Infosys | ₹23 per share | ₹44,490 (▲5.2% QoQ) | ₹7,364 (▲6.4% QoQ) | ▼9.9% |
| HCL Technologies | ₹12 per share | ₹31,942 (▲5.2% QoQ) | ₹4,236 (▲10% QoQ) | ▼19.8% |
| Tech Mahindra | ₹15 per share | ₹13,995 (▲4.8% QoQ) | ₹1,202 (▲6.4% QoQ) | ▼16.9% |
| Wipro | - | ₹22,697 (▲2.5% QoQ) | ₹3,262 (▼2.2% QoQ) | ▼10% |
Except for Wipro, all other top 4 IT companies have announced dividends in the second quarter. However, these stocks were down between 9.9% and 19.8% during the same period.
Four out of five companies announced low single-digit growth in revenue and net profit growth on a sequential basis. Q2FY26 revenue growth was in the range of 2.5% to 5.2%, while on the profitability front, net profit of TCS and Wipro declined from the previous quarter. HCL Technologies was an outlier with 10% QoQ growth in net profit. The last time these IT firms saw double-digit revenue growth was in the March quarter of FY23, as digital transformation, cloud adoption and remote-work demand during the COVID-19 pandemic supported the business growth.
What does this trend of high dividend payout indicate?
Experts believe if the company keeps giving regular dividends to its shareholders but has weak earnings and stock performance, it usually means the business is generating stable cashflows, which support dividend payouts. This is true in case of IT companies as they keep receiving recurring income from their multi-year IT deals.
However, weak profit growth limits the share price appreciation. Meanwhile, paying consistent dividends without reasonable earnings growth could strain cash reserves and become unsustainable over time. In the long run, such companies usually attract income-focused investors looking for regular cash payouts rather than high growth.
Key corporate actions & stock returns
| Company | Corporate actions (since 2022) | Dividend yield | 1-year return | 3-year return | YTD return |
|---|---|---|---|---|---|
| TCS | 19 dividends, 2 buybacks | 1.99% | ▼ 33.9% | ▲ 1.2% | ▼ 26.3% |
| Infosys | 9 dividends, 2 buybacks | 2.94% | ▼ 26.6% | ▲ 4.8% | ▼ 22.2% |
| Tech Mahindra | 9 dividends | 3.12% | ▼18.1% | ▲ 47% | ▼ 15.3% |
| HCL Technologies | 17 dividends | 3.61% | ▼ 26.8% | ▲ 64% | ▼ 22.01% |
| Wipro | 6 dividends, 1 buyback & 1 bonus | 2.49% | ▼ 10.8% | ▲ 17.9% | ▼ 20.08% |
TCS has given the highest number of dividends since 2022, along with 2 share buybacks, with notable payouts like ₹66 (special) and ₹30 (final) per share, along with multiple interim dividends ranging from ₹9 to ₹11 per share. Meanwhile, its share price has declined nearly 34% in the last one year and over 26% so far this year.
HCL Technologies has been a consistent dividend payer, giving out dividends every quarter. The company’s stock has performed relatively well over a three-year period, with a return of 64%. However, the stock is down over 22% so far this year.
Infosys has also given out regular dividends to its shareholders, with the most recent dividend of ₹23 per share in the September quarter. The company’s board approved a buyback of shares worth ₹18,000 crore at ₹1,800 per share on September 11, 2025.
Key factors behind weak IT sector performance
India's IT sector is facing a challenging period, with several factors contributing to its weak performance in recent years. Despite expectations of moderate growth, the sector continues to grapple with persistent headwinds.
- Sluggish global demand: Revenue growth has been impacted by cautious client spending amid weak global IT demand, especially from important markets like the US.
- Impact of AI and automation: The adoption of AI, automation and a decline in the demand for traditional IT services is also impacting Indian IT firm business.
- Hike in H1-B visa fee: Indian IT companies have been severely impacted by the recent US policy change that imposes a $100,000 fee on new H-1B visa applications. The industry is heavily reliant on H-1B visas, with around 60–70% of these work permits going to Indian nationals deployed by IT companies on projects in the US.
In conclusion
Most Indian IT companies continue to pay dividends even as their earnings growth is slowing. Experts believe IT companies are giving regular dividends and occasional share buybacks to offer steady returns and reassure investors during rough phase as the industry faces AI disruptions and demand slowdown.
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