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Large IT Firms Face Soft Quarter, Mid-Caps Poised to Outperform: Emkay Report
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News18•01-10-2026, 14:00
Large IT Firms Face Soft Quarter, Mid-Caps Poised to Outperform: Emkay Report
- •Large IT services companies are expected to have a soft Q2 due to cautious client spending and economic uncertainty, while select mid-cap firms may outperform.
- •Clients are increasingly focusing on AI-led efficiency, vendor consolidation, and cost reduction, leading to a reset in commercial arrangements within the IT services sector.
- •Emkay predicts constant currency revenue growth for Tier-1 IT companies between -1.0% and 3.1%, and for Tier-2 companies between 0.5% and 8.0% in Q2.
- •The NIFTY IT Index has underperformed the broader market, reflecting concerns over slower growth, weak discretionary demand, and AI's impact on traditional IT services.
- •Investors will closely monitor management commentary on FY27 revenue and margin guidance, client furloughs, recovery in discretionary spending, and the impact of AI on IT services and budgets.
Key Questions Answered
For Tier-1 IT companies, constant currency revenue growth is expected to range between -1.0 per cent and 3.1 per cent, while Tier-2 companies are projected to see growth between 0.5 per cent and 8.0 per cent.
Clients continue to remain cautious due to ongoing economic uncertainty and macro ambiguity, leading them to adopt a restrained spending approach.
The NIFTY IT Index has underperformed the broader market by 5.6 per cent over the past one month and 6.5 per cent over the past six months.
