Indian IT Earnings Likely to Stutter in Fiscal 2026

The Indian IT sector, a cornerstone of the country's economic growth, is facing an uncertain future as geopolitical uncertainties and US trade policies cast a long shadow over its prospects. The sector, which has long been a beacon of India's economic prowess, is now grappling with the potential impact of US Fed rate cuts and the looming threat of a recession in the United States. The sector's earnings are likely to stutter in fiscal 2026, as analysts warn of a slowdown in discretionary spending and a delay in the recovery of the IT services industry.

The US Fed rate cut, which was initially seen as a catalyst for the IT services industry, has failed to deliver the expected boost. The rate cut was expected to improve the capital expenditure (capex) outlook for enterprises and act as a catalyst for the growth cycle in the IT services industry. However, the current geopolitical uncertainties and US trade policies have created a higher level of uncertainty in terms of how the first half of fiscal 2026 will pan out and what impact it will have on the FY26 recovery rate. The US trade policies, including fresh tariffs on trading partners, have sparked concerns over a slowdown in the United States, a key market for Indian IT companies. This has led to a "wait-and-watch" mode among clients, delaying new projects and impacting growth prospects for Indian IT companies.

The impact of the US Fed rate cuts on the Indian IT sector is multifaceted. On one hand, lower equity costs could drive up stock multiples, revived discretionary demand as the economy recovers, and lower corporate interest burdens could open up room for higher operating expenses. On the other hand, the US Fed rate cuts may not lead to a full recovery for the IT services industry, as various factors will influence outcomes over the coming years. Tailwinds for the IT industry include the push for enterprise innovation, rising demand for AI, cloud transformation, cybersecurity, and cost-cutting pressures, which will boost outsourcing. Headwinds include volatile currencies, ongoing economic uncertainty, US election outcomes, wage inflation in India, and increased competition. The impact of AI on service delivery and interest in global capability centres could also reduce traditional outsourcing demand.

The Indian IT sector is preparing to announce its second-quarter earnings, with Tata Consultancy Services Ltd. starting the reporting season on 10 October. Both large and mid-sized companies are expected to report better revenue growth than in the first quarter, as macroeconomic challenges ease and the sector recovers from its slowest growth year in FY24. However, the sector's earnings are likely to stutter in fiscal 2026, as analysts warn of a slowdown in discretionary spending and a delay in the recovery of the IT services industry.

The Indian IT sector is at a crossroads. The sector's earnings are likely to stutter in fiscal 2026, as analysts warn of a slowdown in discretionary spending and a delay in the recovery of the IT services industry. The sector must navigate the challenges posed by geopolitical uncertainties and US trade policies, and find ways to mitigate the risks to its growth trajectory. The sector's future depends on its ability to adapt to the changing landscape and find new opportunities for growth.



The Indian IT sector is a vital component of the country's economy, and its future is closely tied to the global economic landscape. The sector's earnings are likely to stutter in fiscal 2026, as analysts warn of a slowdown in discretionary spending and a delay in the recovery of the IT services industry. The sector must navigate the challenges posed by geopolitical uncertainties and US trade policies, and find ways to mitigate the risks to its growth trajectory. The sector's future depends on its ability to adapt to the changing landscape and find new opportunities for growth.

The Indian IT sector is a vital component of the country's economy, and its future is closely tied to the global economic landscape. The sector's earnings are likely to stutter in fiscal 2026, as analysts warn of a slowdown in discretionary spending and a delay in the recovery of the IT services industry. The sector must navigate the challenges posed by geopolitical uncertainties and US trade policies, and find ways to mitigate the risks to its growth trajectory. The sector's future depends on its ability to adapt to the changing landscape and find new opportunities for growth.

The Indian IT sector is a vital component of the country's economy, and its future is closely tied to the global economic landscape. The sector's earnings are likely to stutter in fiscal 2026, as analysts warn of a slowdown in discretionary spending and a delay in the recovery of the IT services industry. The sector must navigate the challenges posed by geopolitical uncertainties and US trade policies, and find ways to mitigate the risks to its growth trajectory. The sector's future depends on its ability to adapt to the changing landscape and find new opportunities for growth.