# Indian IT Q2 Preview: TCS and Infosys Face Muted Revenue Growth While Tech Mahindra Eyes Bonus Shares

> Large Indian software exporters face a sluggish second quarter in FY27 due to macroeconomic pressures and AI deflation, even as mid-tier players outperform and Tech Mahindra considers bonus shares.

**Type:** article · **Category:** Money · **Published:** 2026-10-06 · **Source:** TrendKia
**Canonical:** https://trendkia.com/en/money/it-sector-q2-preview-tcs-infosys-muted-growth-tech-mahindra-bonus-shares-43740 · **Language:** English
**Tags:** IT Sector, TCS, Infosys, HCL Tech, Wipro, Tech Mahindra, Bonus Shares

Indian information technology powerhouses are gearing up to report their corporate earnings for the second quarter of FY27, with industry bellwether Tata Consultancy Services scheduled to initiate the reporting calendar this week. Industry analysts expect large-cap technology companies to deliver subdued financial growth during what is traditionally considered a seasonally strong period. Beyond top-line numbers, market participants are closely monitoring shareholder reward announcements, including interim dividends and a potential bonus issue.

## Official Earnings Announcement Schedule
The reporting calendar opens on October 8 with the financial disclosures from Tata Consultancy Services. HCL Tech is slated to announce its performance on October 12, followed by Tata Technologies, another enterprise from the Tata Group stable, on October 14. Mid-month disclosures continue on October 15 with both Wipro and Tech Mahindra scheduled to report their performance.

Later in the month, L&T Technology Services will publish its quarterly numbers on October 19. Both Coforge and Infosys are set to unveil their second-quarter performance on October 23, while Kfin Tech is scheduled to follow on October 26. Other software service providers across the country have yet to formalize and announce their official board meeting dates.

## Large-Cap Moderation Contrasted with Mid-Tier Outperformance
Analysts at Kotak Institutional Equities anticipate sluggish growth numbers across tier-1 software exporters, attributing the softness to AI-induced deflationary pressure and an uncertain macroeconomic climate. Among leading players, HCL Technologies is expected to show the strongest organic growth at 2% quarter-on-quarter and 2.4% year-on-year. Conversely, Infosys is projected to post organic sequential growth of 1.1% and 0.2% year-on-year, while TCS may see 0.5% quarter-on-quarter organic expansion and 2.8% year-on-year growth. In the hybrid category, Tech Mahindra is forecasted to generate 1.6% sequential and 6.6% annual growth, while LTIMindtree may lag with 1.0% sequential expansion and decelerating annual growth of 5%.

Mid-tier software services providers are anticipated to continue their outperformance against the sector's giants. Persistent Systems is expected to achieve 7% sequential growth driven by the execution of mega deals, followed by Coforge at 4.5% and MPHL at 3.5%. Pure-play engineering research and development firms are expected to display sluggish momentum, whereas Sagility is slated to lead the business process outsourcing segment.

## Global Macro Headwinds, Federal Reserve Policy, and IT Budgets
Pritesh Thakkar, Vice President and Research Analyst at PL Capital, observes that software service firms will likely register only modest improvement during Q2FY27. Geopolitical tensions in the Middle East continue to weigh heavily on corporate decision-making and client discretionary budgets. Furthermore, the US Federal Reserve's recent 25 basis point interest rate hike, which marked its first upward revision since July 2023, coupled with expectations of another rate hike before the conclusion of calendar year 2026, is keeping corporate technology outlays restrained.

The analyst also notes that while client adoption of artificial intelligence initiatives remains healthy, these contracts remain relatively small in size and short in tenure. Consequently, these AI engagements are currently insufficient to plug revenue leakage from traditional technology services, restricting the overall top-line expansion rate. Median constant currency revenue growth for Tier I companies is projected around 0.9% sequentially, supported in part by inorganic buyouts, whereas Tier II peers are anticipated to clock roughly 2.7% sequential growth supported by faster conversion of recent deal wins.

## Company-Wise Trajectories and Sector Drivers
Analysts at Choice Institutional Equities observe that TCS and Infosys are poised to demonstrate relative resilience with sequential growth rates of 0.0% and 1.5%, respectively. Wipro is forecasted to contract by 0.7% on a sequential basis. HCL Tech is expected to achieve 0.7% growth, staying within its guidance framework, while Tech Mahindra at 1.2% and LTM at 1.6% are projected to benefit from healthier deal signings and operational execution. Mid-tier firms should maintain 2.5% to 4.5% sequential growth, powered by steady activity within financial services, with Coforge positioned at the forefront aided by the Encora integration.

The banking, financial services, and insurance vertical remains the foundational growth engine across the industry. PL Capital expects Tier I median sequential constant currency expansion of 1%, led by HCLT at 2.4% with acquisition support, while Wipro at -0.5% and TCS at 0.4% are likely to trail. Among Tier II players, Coforge could record 11.3% constant currency growth aided by one month of revenue consolidation from Encora, and Persistent Systems may expand by 7.6%. KPIT is expected to witness revenue contraction for the second consecutive quarter due to continued sluggishness in automotive ER&D expenditures.

## Operating Margin Trends, Foreign Exchange Headwinds, and Annual Guidance
Operating EBIT margins are expected to face headwinds on a sequential basis as the depreciation of the Indian Rupee slowed down relative to the preceding two quarters. Thakkar projects Tier I median EBIT margins to improve by 40 basis points quarter-on-quarter to 21.1% on better operational discipline, while Tier II median EBIT margins should stay flat at 15.1%. Margin fluctuations across covered entities are estimated to span between -120 basis points and +100 basis points. Kotak Institutional Equities highlighted that cash-flow hedging programs might delay the translation of currency depreciation into bottom-line profits, resulting in forex losses for Tech Mahindra, LTM, Coforge, and Hexaware.

Regarding forward-looking guidance, Kotak anticipates Infosys may trim its annual growth projections to 1.5-2.5%, down from the earlier 1.5-3.0% band, a figure that includes 170 basis points of inorganic contribution. HCL Tech's organic growth guidance is expected to shift to 2-3% from 1-4%, with overall revenue guidance estimated at 3-4% after consolidating the HPE telco business and Jaspersoft acquisition. Wipro is projected to guide between -2% and 0%. Meanwhile, Choice anticipates companies will maintain their margin guidance, relying on cost optimization levers to counterbalance foreign exchange effects and ongoing AI investments.

## Shareholder Returns: Interim Dividends and Tech Mahindra Bonus
Shareholder payouts represent a key focus for investors during this earnings season. TCS will review the proposal for a second interim dividend for equity holders. HCL Tech has stated its board will take up the declaration of a third interim dividend for FY27 on October 12, while Infosys will evaluate its first interim dividend for the current fiscal year. L&T Technology Services is also reviewing an interim dividend for the six-month period ending September 30, 2026. Wipro has not presented any dividend proposals for this meeting.

The focal point of corporate rewards centers on Tech Mahindra. According to its regulatory disclosure, the company's board of directors will convene on October 15 to evaluate both an interim dividend and a proposal for issuing bonus shares to shareholders.

## Nifty IT Index Slump and Valuation Dynamics
The earnings season arrives against the backdrop of significant selling across domestic technology counters. As of October 6, 2026, the Nifty IT index dropped nearly 9% on a month-on-month basis and declined by more than 19% over a one-year timeframe. Selling pressure across individual stocks over the past 30 days saw Infosys sink 11%, TCS decline over 9%, Coforge drop nearly 8%, Wipro tumble nearly 9%, Tech Mahindra retreat over 6%, and HCL Tech slide nearly 8%. The steepest pullbacks occurred in Oracle and LTIMindtree, falling 14% and 13% respectively, while Mphasis and Persistent fell 6% and 3%.

Despite a 27% year-to-date contraction in the Nifty IT index, corporate valuations continue to command a premium relative to international peers. Market observers anticipate management commentary to emphasize long-term opportunities while remaining cautious about near-term demand. Meaningful share price rebounds are expected to remain tactical until discretionary corporate budgets recover and revenue from artificial intelligence services begins to offset traditional service deflation.

## What this means for you
Sluggish corporate earnings and the recent market slump across technology shares directly affect retail investors and tech sector professionals.

- **For Equity Investors:** Sustained price declines in major software counters have dampened investment portfolios in the near term. Potential interim dividends from TCS, Infosys, and HCL Tech, along with Tech Mahindra's bonus share evaluation, provide immediate payout opportunities.
- **For IT Professionals:** Constrained revenue expansion and client budget cuts will likely keep hiring pace and salary increments measured. Technology firms are emphasizing cost optimization, meaning widespread headcount expansion may remain delayed.
- **For Mutual Fund Holders:** The sharp drop in the Nifty IT index has dragged down returns across sector-focused technology funds. Investors holding tech funds may need to review their asset allocation until revenue visibility improves.
- **For Broader Markets:** Quarterly corporate numbers and guidance updates from major technology firms will directly influence benchmark stock indices. Softer growth projections could extend volatility across broader domestic market gauges.

## Why this happened
Subdued earnings projections and market declines across software exporters stem from complex macroeconomic pressures and evolving technology dynamics.

- **Geopolitical Uncertainties:** Ongoing conflict in the Middle East has created macroeconomic headwinds that dampen client confidence globally. Enterprise clients are deferring major discretionary technology spending until global conditions stabilize.
- **US Federal Reserve Rate Action:** The Federal Reserve implemented its first 25 basis point rate increase since July 2023, with prospects of an additional hike before the end of calendar year 2026. Higher borrowing costs encourage corporate clients to delay large discretionary software budgets.
- **Deflationary AI Disruption:** While enterprise artificial intelligence adoption is growing, current contracts remain short-tenured and smaller in scope. These AI projects have not generated sufficient volume to compensate for revenue leakage in traditional IT support services.
- **Currency Hedging Impacts:** Moderation in the pace of rupee depreciation combined with active cash-flow hedging contracts means currency changes will not flow straight to bottom lines, triggering potential forex losses.

## Questions & Answers

### 1. When will TCS and Infosys report their Q2 results?
TCS is scheduled to announce its quarterly earnings on October 8, while Infosys will declare its financial results on October 23.

### 2. Which technology firm is considering a bonus share issue?
Tech Mahindra's board of directors will meet on October 15 to consider both an interim dividend and a proposal for bonus shares.

### 3. How significantly has the Nifty IT index declined recently?
As of October 6, 2026, the Nifty IT index fell nearly 9% month-on-month and has declined over 19% on an annual basis.

### 4. Which tier of IT companies is forecasted to outperform?
Mid-tier players including Persistent Systems and Coforge are expected to outperform large-cap peers due to mega deal ramp-ups and acquisitions.

### 5. Which IT firms are considering interim dividend payouts?
TCS, HCL Tech, Infosys, L&T Technology Services, and Tech Mahindra are evaluating interim dividends during their board meetings.

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