Infosys Ltd has become the first major Indian IT services company to express confidence in a turnaround, even as peers like Tata Consultancy Services Ltd (TCS) and Wipro Ltd adopt a cautious stance amid macroeconomic uncertainty and Gen AI disruptions.

In a conversation with Kotak Institutional Equities analysts, Infosys chief executive Salil Parekh said tech spending is likely to improve. This comes after US President Donald Trump’s tariff flip-flops have put client spending in limbo.

“Tech spending is likely to improve with lower macro uncertainty in developed markets,” said Kotak Institutional Equities analysts Kawaljeet Saluja, Sathishkumar S., and Vamshi Krishna, in a note dated 19 August.

Infosys gets more than three-fourths of its business from developed markets, including the US and Europe.

Most of Infosys’s growth is driven by its financial services vertical, which makes up a little more than a fourth of its revenue.

The brokerage also noted that the country’s second-largest IT outsourcer is confident of meeting its FY26 guidance.

“The company is reasonably confident of meeting its FY2026E outlook,” Kotak analysts added, citing resumed transformation programs and easing trade uncertainties.

The Bengaluru-based IT services company also raised the lower end of its FY26 guidance to 1-3% in constant currency terms in July, higher than the flat 3% growth it had projected in April, which was its slowest revenue guidance in at least a decade. Constant currency does not take currency fluctuation into account.

Much of the increase in guidance was because of its acquisitions of US-based MRE Consulting and Australian cybersecurity services firm, The Missing Link, for about $98 million, both of which were announced earlier this year.

However, Bengaluru-based Parekh was not all that sanguine on the macroeconomic environment back then.

Infosys optimism

“With the current outlook, we have seen a lot of the discussion on the economy worldwide having come to more stable situations but still seems that it’s not fully settled,” said Salil Parekh, chief executive of Infosys, during the company’s post-earnings press conference on 23 July.

A second reason for Infosys’s newfound confidence is its reliance on its margin improvement plan.

“Competitive intensity for large deals remains elevated, but early focus and Project Maximus have helped maintain stability,” Kotak said.

Project Maximus is Infosys’ margins expansion programme launched in July-September 2023. It focuses on better large deal execution and reduced costs as one way to retain margins.

Parekh’s commentary is similar to that of New Jersey-based peer C. Vijayakumar, who is the CEO of HCL Technologies Ltd.

“We observed that the environment remains stable from an overall perspective, with some variations across specific verticals. It also did not deteriorate as feared at the start of the quarter,” said Vijayakumar, as part of his prepared remarks during the company’s post-earnings press conference on 14 July.

Infosys and HCLTech ended the April-June 2025 period with $4.94 billion and $3.55 billion, respectively, up 4.5% and 1.3% sequentially.

Like Infosys, the third-largest HCLTech also narrowed its revenue guidance last month. The company now expects revenue growth between 3% and 5% in constant currency terms, higher than its 2% guidance on the lower end it had called out in April.

Still, this is coming at the cost of margins.

Last month, HCLTech lowered its full-year operating margin target to 17-18% from its earlier stated 18-19%. Although the management of the country’s third-largest IT services firm attributed it to restructuring costs, analysts said this was to attract more business.

Contrast in tones

Both companies reported a decline in profitability last quarter. Infosys and HCLTech reported operating margins of 20.8% and 16.3%, down 20 basis points and 160 basis points, respectively.

Infosys’ upbeat tone contrasts with TCS, which recently announced a 2% workforce reduction, about 12,200 employees, citing strategic initiatives. TCS posted a 0.59% sequential revenue decline last quarter, the worst among India’s top five IT firms.

Much of TCS’s recent growth was driven by a $1.83 billion BSNL contract, which is nearing completion. Analysts warn that without a replacement, FY26 could see revenue decline.

“The magnitude of BSNL ramp-down (if it goes un-replaced) would mean that FY26 could be a year of declining revenue,” Motilal Oswal analysts said on 11 April.

Despite this, TCS remains the most profitable among peers, with operating margins at 24.5%.

While revenue growth has not been an issue for Infosys, similar concerns have been raised in the past on its ability to win deals valued at over $1 billion.

Fourth-largest Wipro Ltd and fifth-largest Tech Mahindra Ltd have also adopted a cautious outlook amid macroeconomic uncertainties. They ended last quarter with revenues of $2.59 billion and $1.56 billion, down 0.35% and up 0.97%, respectively.

Cautious optimism

However, a second brokerage said the mood across the largest IT outsourcers is expected to improve going forward.

“Demand, albeit soft, did not deteriorate. Increase in lower end of revenue guidance by INFO and HCLT indicates players don’t expect deterioration going ahead too. Strong order backlog and a healthy deal pipeline likely limit downside,” said JM Financial analysts Abhishek Kumar, Nandan Arekal, and Anushree Rustagi, in a note dated 19 August.

The brokerage added that the US Federal Reserve’s interest rate cuts could benefit the country’s $283 billion IT industry.

“Moderating inflation expectations, easing labour market situations (including IT Ops /Helpdesk/Software development jobs) and possibly the expectations that companies will absorb tariff-linked cost escalation have improved odds of Fed-rate cuts in September. This could possibly be a catalyst for mean reversal in IT Services’ valuation,” said the JM Financial analysts.

Rate cuts enable companies to borrow money from banks and financial institutions, with which they can fund their tech projects.

For now, investors have not been all that enthusiastic about the country’s top three IT outsourcers. Since the start of the year, TCS, Infosys, and HCLTech’s shares have dropped 24.4%, 20.46%, and 22%, respectively.