Indian IT firms face muted Q1 as AI, weak spending weigh.

The April-to-June quarter is usually a strong one for India’s $315 billion IT sector, helped by higher billing days and new project starts. However, analysts expect a slow start to the fiscal year that could push back hopes of a recovery.

India’s largest IT services company, Tata Consultancy Services, kicks off the earnings season on Thursday, with peers Infosys, HCLTech and Wipro reporting later this month.

While India’s top six IT firms are expected to report around 14% year-on-year revenue growth in rupee terms, with net profit rising 12%–13%, this would largely be due to the impact of sharp rupee depreciation.

Stripping out exchange-rate effects, the companies are expected to post only 2.8% revenue growth in constant-currency terms. Citi expects a fourth straight year of subdued growth for Indian IT firms. JPMorgan sees revenue growth staying below 3%–4% for the foreseeable future.

The IT sector is racing to adapt to changing customer needs as companies around the world step up the use of AI tools and agents to cut costs and speed up software development cycles.

Software firms have slowed hiring, with TCS Chairman N. Chandrasekaran saying the "day is not far" when the company will have an equal number of AI agents and employees.

Fears that AI will disrupt the IT sector’s traditional labour-intensive business model dragged the Nifty IT index down 9.5% in the June quarter, even as India’s benchmark Nifty 50 gained 6.9%.

Indian IT firms are in a "perfect storm," Nomura said in its earnings preview, with Middle East conflict-related uncertainty adding to AI-driven pricing pressure.