Indian IT firms face weak Q4 amid AI and war risks

India’s top information technology companies are expected to report a subdued fourth quarter, with growth largely supported by currency effects rather than strong underlying demand, according to brokerage estimates.

Firms such as Tata Consultancy Services (TCS), Infosys, and HCLTech are projected to post revenue and profit growth of around 10% year-on-year. However, analysts say much of this expansion is driven by a weaker Indian rupee rather than improved business conditions, News.Az reports, citing Reuters.

The outlook for the sector remains pressured by ongoing global uncertainties, including geopolitical conflicts, cautious client spending, and rising concerns over the impact of artificial intelligence on traditional IT services.

Brokerages note that discretionary spending by global clients remains weak, with extended deal cycles and a continued focus on cost optimisation rather than expansion.

Investor concerns around AI disruption have intensified, with companies such as Anthropic and Palantir contributing to fears that automation and advanced tools could reduce demand for traditional outsourcing services.

As a result, India’s IT index has underperformed broader markets, reflecting uncertainty over how firms will adapt to AI-driven changes in the industry.

Despite weak demand, the sector is benefiting from a 4% depreciation of the Indian rupee against the US dollar during the quarter. Since IT firms earn most of their revenue in foreign currencies but pay costs in rupees, a weaker currency boosts reported profits.

Brokerages expect revenue growth forecasts for the next fiscal year to remain modest, with companies likely to project low-single-digit to mid-single-digit expansion.

While some segments such as banking and financial services remain relatively stable, areas like retail, healthcare, and technology services are expected to face continued pressure.

Analysts say future performance will depend on whether IT firms can demonstrate resilience and adaptation in an AI-driven environment, as investors increasingly demand proof of sustainable growth.

News.Az 

By Aysel Mammadzada