Indian IT shaking off demand blues as client spends tick up

The $283 billion IT service industry may be slated for a demand recovery after a depressed couple of quarters, as companies signal a pick-up in discretionary client spending in 2026 and raise their revenue growth outlook, aided by AI-led deals.

Three large-cap service providers—Tata Consultancy Services, Infosys and HCLTech- —have reported their thirdquarter results for the fiscal year 2026 so far this week in January, with two of them having raised their revenue guidance. Infosys led this sentiment by raising its full-year revenue guidance to 3-3.5%, citing improved market visibility and robust large deal wins totalling $4.8 billion. This was the Bengaluru-headquartered company’s second consecutive upward guidance revision.

HCLTech similarly demonstrated strength, upgrading its services revenue guidance to 4.75-5.25% following a multi-quarter high in contract bookings worth $3 billion. While the company noted deflationary impact in traditional spending areas like business operations and application development, it is banking on demand from newer, AIenabled services.

While TCS doesn’t generally publish guidance details, the IT bellwether expressed similar sentiments in its earnings, even as it acknowledged macro and geopolitical uncertainty. The IT giant’s total contract value stood at $9.3 billion.

“While the nature of deals continues to be cost-optimisation focused, for a lot of the players, new scope wins have also increased and transformation is driving some of these. This is contrary to the expectations of the uncertainty around tariffs and geopolitical issues that have been looming,” said Namratha Dharshan, chief business leader at Information Services Group (ISG), a global technology research and advisory firm.

IT departments expect AI to be the largest increase in their spending over last year’s budget, growing 5.6%, she added. Brokerages across the board noted the shift in spending outlook. “A gradual improvement in spend seems to be more realistic amid stability + incremental thawing + select AI scaling. While the AI debate remains, sentiment for the group seems to be turning more balanced,” analysts at TD Cowen noted on Infosys and the IT sector.

ICICI Securities noted that it will watch out for signs of AI-led demand materially lifting Indian IT services’ revenue growth trajectory. The brokerage acknowledged TCS’s increase in AI and data-led short-cycle projects across industry segments. Meanwhile, ICICI analysts also noted HCLTech’s TCV positions the company well to potentially report the highest growth among largecap peers in FY27.

“On financial services specifically, we see discretionary spend and good traction across the market,” Infosys chief executive Salil Parekh said in the earnings press conference. “Having said that, overall, we want to still see all of the other industries and segments start to show (growth).”

HCLTech CEO C Vijayakumar had told ET in an interaction that he believes the tech spend will continue to grow. “The capex spend in hardware and software over the last two or three years is translating to services spend, and that is the new discretionary areas that we are targeting.”