Q4 IT Earnings Preview: Trump Tariffs, AI Disruption, and Cautious FY26 Guidance in Focus:

India’s $282 billion IT services industry is set to kick off the Q4FY25 earnings season this week, with Tata Consultancy Services (TCS) leading the way on April 10. The sector faces mounting pressure from Trump administration tariffs, potential slowdowns in U.S. consumption, and macroeconomic headwinds that could impact tech spending.

The upcoming results and management commentary will set the tone for FY26, especially as North America contributes over 60% of the industry’s revenue.

Revenue Growth Concerns

Analysts expect a sequential revenue dip for large-cap IT firms in the January-March quarter due to seasonal factors and weakening demand. Kotak Institutional Equities highlighted that companies like LTIMindtree may face additional pressure from client-specific issues, including a major scale-back by Citigroup.

Guidance for FY26 is likely to remain subdued, with Infosys expected to project 1–4% growth and HCLTech 3–5%. Mid-cap companies like Persistent, Coforge, and Mphasis may post stronger results, while tier-1 firms brace for a softer quarter.

Trump Tariffs and Visa Uncertainty

Trump’s new reciprocal tariffs, pegging Indian exports to the U.S. at 26%, have raised alarms across the IT sector. This, along with H-1B visa policy uncertainty and budget cuts from U.S. agencies like DOGE, has deepened concerns of a further slowdown in client tech budgets.

Analysts warn of potential stagflation or recession in the U.S., and companies are preparing for tighter margins and reduced project scopes.

Deal Pipeline Steady but Cautious

Despite challenges, the deal pipeline remains stable. Nuvama Institutional Equities expects a pickup in discretionary spending in BFSI and steady contract flows. Annual contract value (ACV) is improving, even if mega-deals remain scarce.

Kotak notes that deal slippages are easing, and FY26 could benefit from resumed spending and improved execution rates. Brokerages also view corrected stock valuations as favorable for long-term investors.

Conservative FY26 Guidance Expected

Companies are likely to maintain cautious forward-looking statements. Infosys may guide for modest growth, while HCLTech could include benefits from its latest acquisition. Wipro might issue the weakest guidance among peers.

Margins are expected to stay consistent—Infosys at 20–22% and HCLTech at 18–19%, according to Kotak and Nomura.

Generative AI's Growing Role

Generative AI (Gen AI) adoption is becoming central to IT services strategy. Accenture reported $1.4 billion in new Gen AI bookings in Q2FY25 alone, with a total of $5.6 billion since launch. Indian IT companies are now integrating AI tools to improve service delivery and operational efficiency.

Analysts at Kotak, HDFC Securities, and Nomura are tracking how AI will reshape pricing and revenue per employee—two key metrics as cost optimization becomes critical.