From The Economic Times · Nikhil Agarwal · · 1m 50s
Indian IT Q2 Earnings Dilemma Deepens
AI pressures weaken Indian IT growth as pricing power falls.
In brief
AI pressures weaken Indian IT growth as pricing power falls. Indian IT companies face weaker organic growth and falling pricing power amid AI-driven deflation, with large caps expected to grow 0.5% while mid-caps surge to 12%. Originally reported by The Economic Times.
Q2 earnings season begins
India’s IT sector enters Q2 earnings season this week facing a contradiction.
Deal activity remains strong
Deal activity remains healthy but revenue growth is weakening as clients demand larger shares of ai productivity gains.
Nifty IT index drops 39%
The nifty it index has nosedived about 39% from its record high of 46,088.90 reached in december 2024.
Jefferies forecasts weak growth
Jefferies expects large it companies to deliver weakest q2 growth in three years with organic growth at 0.8% and aggregate at 1.7%.
Kotak warns of pricing deflation
Kotak says ai-adjusted pricing pool is shrinking as clients embed productivity concessions into contract renewals.
AI causes gross deflation
Kotak expects gross deflation of 7% and net deflation of 3.5% as clients push for efficiency gains and lower pricing.
Acquisitions mask weak growth
Hcl tech, infosys, coforge and cyient expected to benefit from recent acquisitions or large deal ramp-ups.
Mid-caps show growth premium
Mid-tier companies trade at 75% premium to large-caps but expect better near-term earnings visibility.
Infosys guidance under pressure
Emkay expects infosys to lower fy27 revenue growth guidance to 1.5%-2.5% from 1.5%-3%.
Wipro faces weak q3 guidance
Wipro expected to provide weak third-quarter guidance with sequential growth ranging from decline of 2% to flat.
Margin improvements fragile
Tcs margins expected to improve by 100 basis points sequentially while hcl tech margins improve by 120 basis points.
AI threatens pricing power
The immediate challenge for indian it companies is converting deals into profitable organic growth before ai-driven productivity erodes pricing power.
The takeaway
Indian IT companies face weaker organic growth and falling pricing power amid AI-driven deflation, with large caps expected to grow 0.5% while mid-caps surge to 12%.
