TCS, Infosys, HCL, Wipro, TechM Q2 results: 4 things to watch, earnings preview

Kotak Institutional Equities in a fresh note expected a steadier quarter for Indian IT services in Q2FY26, with sequential growth of 0.2–6 per cent across companies. Rupee depreciation, combined with cost measures, is likely to support margins despite pricing pressures. Deal wins are expected to be steady to strong, though highly competitive. Infosys, Coforge, and LTIMindtree are likely to post strong results, while TCS and Wipro may trail. Kotak has incorporated revised dollar-rupee rates and H-1B risks, taking a more conservative stance on FY2027 recovery, resulting in 0–3 per cent cuts to FY2026–28 EPS and 2–9 per cent cuts to fair values. The brokerage sees the sector’s risk-reward profile turning attractive, with top picks being Infosys, TechM, Coforge, and Hexaware.

Revenue growth: Unlike previous quarters, there has been no demand deterioration this quarter. Tier-1 companies should see sequential growth, led by Infosys at 2 per cent QoQ. Mid-tier players, including Coforge and Persistent Systems, could report growth of 1.5–6 per cent QoQ. ERD-focused companies may see moderate growth of -2.5 to +1.7 per cent, impacted by automotive weakness, Kotak said.

Margins: Rupee depreciation will help offset pricing pressures, maintaining steady margins for most Tier-1 companies (except HCLT). Mid-tier firms may see YoY margin improvement due to operational leverage and margin focus. Wage revisions are limited, so management commentary will be key.

Guidance: Kotak sees Infosys raising FY2026 revenue growth guidance to 2–3 per cent (from 1–3 per cent), excluding the recently acquired Versent Group. HCL Tech is likely to maintain 3–5 per cent revenue guidance. Wipro may revise 3QFY26 guidance to 0.5 per cent at the midpoint, the domestic brokerage said.

4 key metrics to watch

Deal wins: Large TCV deals dominated by cost takeouts and vendor consolidation; mid-tier players continue gaining share.

Headcount: Utilisation is maxed out; campus hiring and onboarding will support growth. TCS and HCLT may report restructuring-related changes.

GenAI adoption: Expected to be initially deflationary (2–3 per cent impact), focused on productivity, coding assists, and knowledge management. Use cases for new revenue are emerging.

Onsite wages: Tighter H-1B norms may increase local hiring or subcontractor dependence.

Here's what Kotak Institutional Equities said on tier 1 IT majors:

TCS: Kotak sees a moderate 0.2 per cent QoQ revenue growth and stable EBIT margins, aided by rupee depreciation. It sees mega-deal TCV above $10 billion and said focus will be on employee separation, GCC ramp-up, and GenAI impact.

Infosys: The brokerage pegged revenue growth at 1.8 per cent QoQ. It sees  stable EBIT margins and large-deal TCV US$3 bn; revenue guidance revised to 2–3 per cent; investor focus on tariffs, discretionary demand, and GenAI.

HCL Tech: Kotak expects HCL Tech to log 1.7 per cent QoQ revenue growth, wth  70 bps QoQ improvement in EBIT margin. Large deals are seen in $2.5–3 billion range. The IT firm may maintain guidance for FY2026. Investor may focus on margin recovery, tariffs, and GenAI adoption.

Wipro: This IT firm is seen reporting 0.2 per cent QoQ growth. EBIT margin are seen down 40 bps due to upfront deal costs. Large-deal TCV is pegged at $1.5 billion with Q3 guidance at -0.5 per cent to 1.5 per cent).

TechM: Revenue is seen growing 0.9 per cent QoQ. EBIT margin is seen up 70 bps. Net-new deals are estimated at $800 million. Investor focus will be on 15 per cent FY2027 margin target, deal pipeline, and GenAI adoption.

IT stock picks

Kotak prefers Infosys, TechM, Coforge, and Hexaware for their growth visibility, deal quality, and margin resilience.

"Infosys’s ability to participate in large deals, investments to capture growth opportunities and proactive measures to maintain profitability underpin our preference for the company. We believe that TechM is on the right path, with improving quality of deals and a gradual improvement in margins, although achieving the aspirational margin band would require some help from favorable macros. Coforge and Hexaware have scalability attributes, even as the businesses have contrasting dynamics. They are our picks in mid-tier IT," Kotak said.