Information Technology – Jul-Sep’25 Earnings Preview – Steady quarter but broader recovery still away
Published on 04 Oct 2025
2QFY26 is expected to be another quarter of muted performance, the on-ground demand remains unchanged with no recovery in spending sentiment. Although the intensity of tariff uncertainties has de-escalated, Fortune-500 companies continue to stay behind the fence and avoid committing anything upfront. The cost-optimization projects are still being prioritized over the “RUN” initiatives, cost savings are being re-invested to the projects instead of infusing new dollars. The weakness in demand also tends to defer compensation revision for most of the names (except TCS) in Q2, despite the fact the improvement in margins would witness flat to marginal improvement, partly aided by INR depreciation. We expect median revenue growth of 0.8% QoQ in CC terms & 1.2% QoQ in USD terms. While currency volatility is limited in Q2, major currencies like EUR and GBP have strengthened against USD by 1% and 3% QoQ, respectively, which will translate into tailwinds to the tune of 20-90bps QoQ in reported terms except LTTS & TATATECH.
