As geopolitical conditions and an uncertain demand environment will weigh heavily on the IT sector, the September quarter (Q2 FY 2025-26) is expected to be muted for the Indian IT services segment. Besides, the Trump tariffs, though indirectly, will have an impact on this segment.
Single-digit growth is expected during this quarter for a majority of IT companies in India. Traditionally, the September quarter has been a strong one for the Indian IT services industry—a period when demand revives, deal conversions accelerate, and festive sentiment supports business optimism.
“This year, the IT industry faces a reality check. The September 2025 quarter is expected to show muted growth, with most large firms guiding for flat or low single-digit constant-currency performance. Global clients, especially in the US and Europe, remain cautious. Discretionary digital and transformation projects are being delayed, and cost optimisation is once again the boardroom priority. The recent H-1B fee hikes and policy uncertainties in the US have added to the headwinds. At home, Indian IT majors are investing heavily in GenAI, automation, and workforce upskilling, which are essential for the future but pressuring current margins,” pointed out Manoj Kandoth, Founder and Managing Partner, Urjja Resources.
To put this in perspective, in Q1 (FY 2025-26) HCLTech posted a 2.9 per cent QoQ revenue growth in INR terms (1.6 per cent in constant currency) while profits dipped by about 0.5 per cent due to utilisation and investment pressures. Wipro managed a modest 1.5 per cent QoQ revenue rise, with nearly flat constant-currency growth, even as net profit climbed 6 per cent on better cost control. For TCS, brokerages expect only low single-digit QoQ growth under constant currency, reflecting the broader industry mood.
“This quarter could well become a turning point, a pause that forces introspection. Indian IT needs to reimagine its value proposition beyond cost and scale, converting AI pilots into measurable client impact. The next few quarters will test leadership agility, client intimacy, and the ability to monetise technology shifts. Muted numbers aside, this could be the beginning of a deeper transformation — where the industry resets itself for the next wave of growth,” remarked Kandoth.
Experts point out that currently, the overall mood is cautious, global geopolitical uncertainties, prolonged economic headwinds, and the recent tariff-related moves by the US have all added layers of complexity for client companies. These factors have made customers more guarded in committing to new projects.
“During this time, the world is still debating how to apply AI effectively. With ideas and counter-views evolving so rapidly, many small and mid-sized firms are preferring to wait and watch before locking into large-scale automation deals. The demand fundamentals are intact, but recovery will likely be gradual, playing out over the next two to three quarters as clarity returns and businesses firm up their digital and AI strategies,” observed Aditya Narayan Mishra, the CEO and MD of CIEL HR.
While research firm Gartner is optimistic about growth in overall IT services, the dip in net new spending on software and services will drag the growth rate down globally. “At the same time, given the rate card in India, we can hope for stable to positive growth as a possibility in IT services in and from India, which will also benefit from the uncertainty on spend and restrictions imposed on H1B. Though the second quarter JAS (July, August, and September) saw muted activity and a very low increase, having had a good first quarter earlier, coupled with being the largest talent pool at lower cost, India will survive the scare of low growth rates and continue well into 2026,” said Subramanyam Sreenivasaiah, CEO at Ascent HR.
Reports suggest that though there will be status quo in the banking and the financial segment, manufacturing and the retail segments will face tariff and budget pressures. Demand will dip and there are chances that some deal sizes and terms might be trimmed. The $100,000 H-1B visa fee and a proposed 25 per cent US tax on outsourcing is also a cause of concern for the the industry, and reports point out that there could be a shift in delivery models in the future and a possible near-term impact.