The Nifty IT index has declined 7.3 per cent so far in July, dragged down by broad-based selling across technology stocks after a muted set of earnings from major IT companies for the quarter ended June 30, 2025 (Q1 FY26).
Persistent Systems is the worst performer, down nearly 16 per cent month-to-date (MTD) in July, followed by HCL Tech and Coforge, which have declined 13 per cent and 12.6 per cent, respectively. Tech Mahindra and Tata Consultancy Services (TCS) have also seen sharp corrections, falling 11.2 per cent and 9.3 per cent, respectively.
Mphasis has slipped 7.7 per cent, while index heavyweight Infosys has declined 3.3 per cent. Other IT stocks such as LTIMindtree, Wipro, and Oracle Financial Services Software have seen relatively smaller declines, down between 2 per cent and 2.5 per cent.
IT Sector Q1 FY26 Results: Overview
India’s top IT services companies, TCS, Infosys, and HCLTech, reported mixed results for the first quarter of FY26.
According to Ajit Mishra, senior vice president, research, Religare Broking, IT firms reported a subdued first quarter, marked by "muted revenue growth, weak discretionary tech spending, and cautious client behavior amid macro uncertainties".
He said, "While large deal wins provided some support, they were largely cost-optimization driven and lacked immediate revenue conversion. Management commentary remained guarded, with no definitive signs of a near-term demand recovery. Overall, the quarter highlighted continued pressure on growth and elongated decision-making cycles, keeping the near-term outlook soft despite a stable long-term digital transformation opportunity."
Let us take a quick look at the three index heavyweights, TCS, Infosys, and HCL Tech, which cumulatively hold over 62 per cent weight in the Nifty IT index.
Infosys Q1 FY26 Results
Infosys reported a net profit of Rs 6,921 crore for the June quarter, up 8.7 per cent compared to the same period last year. Revenue grew 7.5 per cent YoY to Rs 42,279 crore. In constant currency terms, revenue rose 3.8 per cent. Operating margin stood at 20.8 per cent, slightly lower than 21.1 per cent a year ago. The company’s total deal wins during the quarter came in at $3.8 billion, up from $2.6 billion in the previous quarter.
Vaqarjaved Khan, CFA and Senior Fundamental Analyst at Angel One, said Infosys delivered a standout performance amongst the IT giants. However, he noted that the near-term growth outlook still looks bleak, with the company guiding for 1–3 per cent revenue growth in constant currency terms for FY26. FY26 EBIT margin guidance is reaffirmed at 20-22 per cent, he said.
“The company is well-positioned to handle and execute complex deals given its robust track record and solid partnerships within the ecosystem. We also believe that once there is more clarity on global trade agreements and global giant spending increases, there is a high possibility that Infosys will increase its FY26 growth guidance in the coming quarters,” he said.
TCS Q1 FY26 Results
TCS reported a net profit of Rs 12,760 crore, up 6 per cent from the same quarter last year. However, revenue growth was slow, as it rose just 1.3 per cent to Rs 63,437 crore. In constant currency terms, revenue fell 3.1 per cent. On the bright side, the company bagged deals worth $9.4 billion during the quarter, up 13.2 per cent from a year ago. Its profit margin came in at 20.1 per cent.
According to Khan, TCS reported strong deal wins and showed margin improvement, but revenue growth remained weak. He expects the company’s performance to stay subdued in the second quarter of FY26, and said demand is likely to pick up in the second half of the fiscal year as macroeconomic conditions in the US and Europe become clearer.
HCL Tech Q1 FY26 Results
HCL Tech reported a net profit of Rs 3,843 crore, down 9.7 per cent from last year, mainly due to higher costs and a one-time loss from a client going bankrupt. Its revenue rose 8.1 per cent to Rs 30,349 crore, led by strong growth in its services business. The company’s deal wins for the quarter stood at $1.81 billion, lower than the $2.99 billion it reported in the previous quarter.
Khan said HCL Tech lagged behind its peers in terms of execution despite solid revenue growth of 8.1 per cent YoY. The company came under pressure on margins due to cost overruns, he said. Khan added that HCL Tech has also lowered its constant currency revenue growth guidance for FY26 to 3–5 per cent, citing potential challenges ahead.
Have IT Stocks Valuation Become Attractive
The Nifty IT index has declined 16.7 per cent year-to-date and is down nearly 10% over the past year. It has fallen 21.6 per cent from its 52-week high. As of the July 23 close, the index was trading at a price-to-earnings (P/E) ratio of 27.04, compared to a P/E of 36.41 at its 52-week high.
According to Mishra, valuations in the IT sector have come closer to their long-term averages. However, he believes the sector still lacks strong earnings visibility, particularly on the revenue growth front. He said, "With near term performance largely dependent on cost optimization deals rather than discretionary tech spending, the IT sector does not yet offer deep-value opportunities.."
"With macro uncertainties persisting and demand recovery likely to be gradual, the risk of further downside cannot be ruled out and investors should adopt a cautious, stock-specific approach," he added.
IT Sector Outlook FY26: What Should Investors Look Ahead
Khan said investors should watch global factors like interest rate decisions by the US Federal Reserve, corporate spending in the US and Europe, and updates on trade and tariff policies. These factors could impact how much companies are willing to spend on IT services.
He said that Infosys and TCS have a strong pipeline of deals, but the real challenge is execution, especially for TCS, which has a deal pipeline of $9.4 billion but is still struggling to deliver on some contracts. For HCL Tech, he pointed out that cost overruns have put pressure on profit margins, and it may take some time before margins begin to recover
Mishra said, "Investors should closely monitor macro indicators such as tech spending trends across key global markets like the US and Europe, which will influence demand momentum. The conversion of strong TCVs into actual revenues and timely deal ramp-ups remain critical, as delays could impact growth. Q2 FY26 commentary will be key in assessing the likelihood of a second-half recovery. While the recent correction presents a mildly attractive entry for long-term investors in quality names like TCS and Infosys, a stock-specific approach remains essential amid ongoing near-term risks and weak discretionary demand."
