Coforge, Mphasis among 3 midcap IT stocks to consider as largecaps face revenue headwinds 

ICICI Securities has identified Coforge Ltd, Mphasis Ltd and Persistent Systems Ltd as its preferred midcap IT picks, while also favouring Tech Mahindra among largecaps, as it sees revenue headwinds building for bigger IT players. The brokerage on Tuesday said its primary research suggests AI-led productivity gains are materially compressing turnaround times and reducing human effort across service lines, with IT companies reporting 50-60 per cent productivity gains in certain areas over three to five years of deal tenure.

It said the trend has sharpened over the last three to four months as agentic AI adoption gathers pace. ICICI Securities said its demand indicators for Q1FY27 point to top-line growth headwinds, with three of the five large-cap IT companies cutting FY26 revenue guidance, deal TCV potentially slowing for large-cap IT, and growth in client technology spending and IT services revenue remaining out of step, suggesting higher insourcing and/or incremental technology budgets flowing to AI.

Top micap IT stocks to consider

Explaining its preference, the brokerage said, "We prefer select mid-caps — MPHL, COFORGE and PSYS — and TECHM among large caps, where revenue growth visibility is supported by sustained, healthy large-deal wins. PSYS, COFORGE and MPHL have outpaced peers in improving revenue per employee and gross margins over FY24-TTM Jun’26 and increased market share gains in incremental organic revenue added." 

It added that top-line growth headwinds are continuing because of AI-led deflation, made worse by macro volatility.

According to the brokerage, FY27 revenue growth for the majority of large-cap IT companies could undershoot FY26 growth, with three out of five companies having cut full-year guidance in June 2026. 

It said the disconnect between deal TCV and revenue conversion continued, and year-on-year deal TCV growth has slowed for five out of 10 companies under its coverage in Q1FY27. If deal TCV growth slows further, there could be downside risk to FY28 revenue growth. 

Budget shifts to AI-native and cloud providers

ICICI Securities also said incremental technology budgets are shifting towards AI-native and cloud providers, reflected in sustained strong revenue growth across AI infrastructure, cloud and SaaS players. Gartner data, it said, supports this trend, with the share of IT services estimated to fall to 25 per cent in CY26 from a historical average of about 27-28 per cent.

ICICI Securities said bank technology spending rose 8 per cent year-on-year in H1CY26, but BFSI IT services revenue grew only 4 per cent year-on-year and continued to lag client technology budget growth.

It said AI revenue for IT companies is growing at a healthy pace, but is not enough to move the overall growth needle because of the offsetting decline in non-AI revenue.

The brokerage added that clients are at different stages of the AI adoption journey, with the more advanced ones asking IT vendors to take an AI-first approach across tasks.

It said client budgets are increasingly favouring cloud and AI tool and platform providers, making it harder for IT services companies to grow their share of spending, while margins are being squeezed in commoditised work such as IT infrastructure and application support. Most mega and large deals, it said, now appear to be won through market share gains rather than expansion in overall addressable spending.