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What the Q2 FY27 preview says—and what it does not
Q2 FY27 refers to the Indian IT-services companies’ July–September 2026 quarter. The forecasts available by October 4 are analyst expectations, not company-reported results or confirmed management guidance. Financial Express reports Kotak Institutional Equities’ view that demand conditions “have neither improved nor deteriorated since the June 2026 quarter.” That points to a subdued, broadly unchanged demand backdrop rather than a clear sector-wide recovery or a fresh collapse.
The growth estimates vary materially by company and brokerage. NDTV Profit reported Kotak’s sequential growth expectations of about 2% organic growth for HCLTech, 1.1% for Infosys and 0.5% for TCS. For mid-tier firms, it reported expectations of 7% for Persistent Systems, 4.5% for Coforge and 3.5% for Mphasis. Citi, separately, estimated organic constant-currency services revenue growth from minus 0.7% to 1.5% sequentially for six leading companies. These are forecasts reported by NDTV Profit, not company guidance or realized growth. NDTV Profit’s September 29 preview.
Another October 3 report of Kotak estimates put the expected Infosys growth-guidance range at 1.5–2.5%, compared with 1.5–3% previously, and expected HCLTech overall growth guidance of 3–4%. Those numbers are brokerage projections reproduced in secondary reporting; they should not be read as management statements unless the companies confirm them. FinTech BizNews’ October 3 report.
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Will AI-led deflation weigh on IT revenues?
It may weigh on parts of the existing services book, but the available evidence does not support saying AI is uniformly eliminating IT-services demand. The mechanism is two-sided: AI adoption creates work in areas such as implementation and cloud services, while productivity improvements can reduce the hours and price clients need to buy for some established work. At renewals, clients may seek concessions and retain a greater share of efficiency savings.
Financial Express attributes to Kotak an estimate of around 7% gross deflation and 3.5% net deflation due to AI adoption. These are brokerage estimates reported second hand, not an observed universal sector statistic or a measured result for every company. Their practical implication is that new AI-related work may not yet fully offset lower price realization or reduced effort in traditional services. Financial Express’ September 30 preview.
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Global contract data helps explain how demand for technology services can be strong at the same time that labor-intensive work faces pressure. In its July 9, 2026 release, Information Services Group (ISG) reported that combined global technology-services annual contract value (ACV) rose 43% year over year to $42.4 billion in Q2 2026. Cloud-based XaaS ACV climbed 65% to $31.5 billion, while managed-services ACV increased 2.7% to $10.9 billion. ISG’s index covers commercial outsourcing contracts with ACV of at least $5 million; these global contract-booking values are not quarterly revenue growth for Indian listed providers. ISG’s Q2 2026 index release.
The mix within ISG’s figures matters. Global IT outsourcing ACV declined 3% to $7.7 billion, and application development and maintenance faced pressure as AI reduced reliance on labor-based models. At the same time, new-scope managed-services awards grew 14% to $8.2 billion. Some sourcing activity can represent work moving from one provider to another rather than genuinely new outsourced demand. ISG’s figures therefore provide context for the transition in work, not a direct forecast of any Indian company’s quarterly revenue.
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ISG chief AI officer Steve Hall described the split this way: “The technology services industry continues to ride high, driven largely by AI-fueled demand for hyperscaler services.” He also said managed services remains resilient while “traditional labor-intensive work is increasingly displaced by LLMs.” Hall noted that enterprise attention is shifting from AI opportunity toward execution, return on investment and business outcomes. These observations point to a change in the type and economics of services demanded, not proof that all IT-services work is disappearing.
Why deal wins may not show up in this quarter’s revenue
Total contract value (TCV) measures the value of announced or signed work over a contract’s term; it is not revenue recognized in a single quarter. Revenue depends on when a project starts, how quickly it is staffed or scaled, and the schedule for delivering the work. A company can therefore report a strong TCV while near-term revenue growth remains modest.
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Financial Express’ account of Kotak’s expectations named HCL Technologies, Persistent Systems, Coforge and TCS as potential strong TCV performers, while Infosys, L&T Technology Services and Wipro were expected to have more muted deal activity. These are company-level expectations, not confirmed deal outcomes. Investors tracking results should look for conversion and ramp timing alongside headline contract totals.
Deal quality also matters. A new-scope award may add work to the market, while a vendor transfer can shift existing work between providers without expanding total demand. The available reporting does not provide a complete, directly comparable company-by-company dataset for new work, transfers, AI-related wins and conversion pace, so individual TCV comparisons need that qualification.
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How to read the margin and currency outlook
Analysts expected large-company margins to be broadly stable or marginally lower year over year, even as pricing pressure persisted. Financial Express reported a 0.8% sequential and 8.4% year-over-year rupee depreciation for the quarter in the context of Kotak’s analysis. A weaker rupee can support rupee-denominated results when revenue is earned in foreign currencies, but the benefit may not translate directly or immediately into profit: cash-flow hedges can delay the effect, and company-specific foreign-exchange exposures differ.
The same report said Tech Mahindra, L&T Technology Services, Coforge and Hexaware could face meaningful forex losses. Those are forecasts, not confirmed quarterly losses. A steady reported margin would not by itself show that pricing pressure has ended; currency movements, hedging, wages and execution can offset or amplify pressure from renewals. Final results are needed to see how those factors net out for each company.
What to check when results arrive
- Organic constant-currency growth: Separate underlying services growth from currency translation and reported growth.
- TCV and conversion: Compare deal announcements with starts, ramps and recognized revenue rather than treating contract value as current-quarter sales.
- Renewal pricing and productivity: Watch for evidence that clients are taking a larger share of AI-related savings, especially in fixed-price and maintenance work.
- New AI work: Distinguish revenue-generating AI services from general statements about adoption or market opportunity.
- Margin drivers: Read pricing, wage cycles, currency movements and hedge effects together; headline margin stability can conceal offsetting pressures.
- Guidance: Use management’s own reported outlook, not brokerage estimates reproduced in previews, to assess the path beyond Q2.
For personal investors, these indicators help interpret operating performance; they do not, on their own, establish whether a stock is attractive or predict its return. The quarter’s reported results and company outlooks will determine whether the expected transition from traditional work toward AI-enabled services is beginning to improve growth economics.
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