Indian IT firms post steady Q2 as AI, cloud deals underpin growth

India’s top IT services exporters delivered stable performances in the September quarter (Q2 FY26), buoyed by sustained enterprise demand for cloud, AI and industry-specific transformation projects. However, pricing pressure and AI-led productivity gains are tempering margin expansion and headcount growth across the sector. An analysis of the top five—Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro and Tech Mahindra—along with mid-tier players such as Persistent Systems and LTIMindtree, reveals a sector in transition, balancing near-term resilience with long-term structural change.

Improved performance, cautious optimism

TCS posted a net profit of ₹12,075 crore, up 1.4% year-on-year (YoY), on revenue of ₹62,420 crore, driven by large-deal wins worth $10 billion in total contract value (TCV). Infosys reported a stronger profit growth of 13% YoY to ₹7,364 crore, with revenue rising 9% YoY to ₹44,490 crore, aided by GenAI and cloud transformation mandates.

HCLTech maintained double-digit growth, with revenue up 10.6% YoY to ₹31,942 crore and net profit steady at ₹4,235 crore. The company said scale and portfolio diversification continue to offset macro softness.

Wipro and Tech Mahindra showed mixed results. Wipro’s revenue rose marginally to ₹22,697 crore (up 1.8% YoY), with a net profit of ₹3,246 crore. Two mega-deals worth over $500 million each helped offset weaker discretionary spending. Tech Mahindra reported revenue of ₹13,995 crore (up 5.1% YoY) but saw profit dip 4.5% YoY to ₹1,195 crore, reflecting restructuring costs.

Large deal momentum remains steady

Large-deal momentum remained healthy across the board. Wipro’s total bookings hit $4.69 billion, while Tech Mahindra secured new contracts worth US$816 million in Q2. Analysts said enterprise modernisation, cloud adoption, sector-specific mandates in telecom and BFSI, and the scaling of GenAI pilots to production are underpinning deal flow even amid tighter client budgets.

“The narrative has shifted from experimentation to deployment,” said an industry analyst. “Clients now expect faster time-to-value, pushing vendors toward IP-led and platform-driven delivery models.”

Cloud partnerships and GenAI-led consulting remain a top priority. HCLTech, Infosys and TCS are embedding AI capabilities into their platforms and accelerators, moving from traditional time-and-materials pricing toward outcome-based contracts that monetise IP, data and compliance frameworks.

Margins hold firm amid AI paradox

Despite cost pressures, operating margins were broadly stable, aided by higher offshore mix and improved utilisation. Infosys reported an operating margin of 23.7%, while Wipro’s IT services margin stood at 17.2% and Tech Mahindra’s EBIT margin improved to 12.1%.

HCLTech said its investments in automation and AI tools are beginning to yield benefits in delivery productivity, though analysts caution that rising productivity may paradoxically moderate revenue growth as fewer billable hours are needed per engagement.

This so-called “AI paradox” — higher efficiency but slower topline growth — is shaping investor expectations and forcing firms to rethink monetisation beyond headcount-linked revenues.

Hiring turns selective

Headcount trends reflected this shift. TCS’s total workforce declined sequentially to 5.93 lakh, with attrition at 13.3%. Wipro’s employee base was stable at 2.35 lakh. Most IT majors said hiring remains cautious, with a focus on sales, cloud, and AI roles rather than broad-based campus intake.

“Automation and GenAI are changing delivery models,” noted an HR head at a large IT firm. “The focus is on reskilling and hiring domain experts rather than scaling volume.”

Mid-caps ride the AI wave
Mid-tier firms continued to outpace larger peers in growth and agility. Persistent Systems delivered strong Q2 performance, led by AI integration across services and improved margins from licensing and offshoring. LTIMindtree reported solid sequential growth, leveraging cloud and data-modernisation deals to strengthen its consulting-led model.

These firms are capturing demand for domain-specialised AI and analytics services, particularly in financial services, healthcare, and manufacturing. Their ability to combine deep industry expertise with faster execution cycles is helping them command premium pricing and win share from larger rivals.

The Road Ahead

Overall, Q2 FY26 reaffirmed the sector’s resilience. The large firms are stabilising revenue through deal conversions and platform partnerships, while mid-caps are driving innovation in AI-first delivery.

Yet, the road ahead hinges on whether Indian IT firms can monetise their AI investments and IP assets fast enough to offset the inevitable tapering of traditional labour-arbitrage revenue. As GenAI moves from pilot to production, the winners will be those who can convert automation gains into recurring platform-led income.

In essence, India’s IT services sector is adapting rather than accelerating — stable at the top, nimble at the mid-tier, and collectively preparing for an AI-powered, outcome-driven growth cycle.