India Inc finds little to celebrate as early Q1FY26 results reveal tepid demand

India Inc’s Q1FY26: A mixed bag — topline falters, but bottom-line holds its ground

India Inc began FY26 on a subdued note as June quarter results revealed pressure on topline due to weak demand, even as softer input costs and sharper cost controls supported bottom-line performance. Market participants view the Q1FY26 earnings as broadly in line with expectations, and anticipate that earnings downgrades may moderate from here.

So far, the bulk of IT, banking, and select consumer-focused companies have reported Q1 results. Both banks and IT services posted muted earnings, as expenses rose faster than revenues. For banks, sluggish credit growth and margin compression weighed on performance, while IT services struggled with weak discretionary spending in an uncertain global environment marred by tariffs. Here's a snapshot:

IT Services

IT earnings were mixed in a quarter where expectations were already low. As per Bloomberg, 24 listed IT firms reported just 3 percent year-on-year revenue growth — the slowest in four quarters, while sequential growth declined by 1 percent, marking the eighth straight quarter of sequential contraction.

Profitability was slightly better year-on-year and sequentially, but aggregate profit growth of nearly 10 percent in Q1FY25 halved to 4.24 percent in Q1FY26. Sequential profits also fell from 5.8 percent in the previous quarter.

TCS disappointed with a 3.3 percent sequential decline in constant currency revenue, worse than expected, though margins improved modestly as wage hikes were delayed amid global headwinds. Deal wins remained healthy but trailed the previous quarter, and management commentary remained cautious.

Wipro guided for better topline in the second half of FY26, with Q2 revenue guidance of minus 1 percent to plus 1 percent constant currency, suggesting improvement ahead. Wage hikes remain on hold, and analysts await consistent execution before turning positive.

HCL Tech missed margin expectations as EBIT margin fell to 16.3 percent due to delayed ramp-ups, GenAI investments, and a client bankruptcy. It cut its margin guidance by 100 basis points to 17–18 percent while raising the lower end of FY26 revenue guidance to 3–5 percent.

LTIMindtree outperformed peers with 0.8 percent constant currency revenue growth and hinted at another mega deal soon. Management expects double-digit growth in the second half of FY26 and 100 basis points margin improvement in the near term.

Tech Mahindra posted its seventh consecutive quarter of EBIT margin expansion but missed on topline. Management remains optimistic about sequential growth from Q2 onwards and reiterated that FY26 will be stronger than FY25.

Banking

Bloomberg data showed that banks posted 4.3 percent year-on-year growth in net interest income — the slowest in several quarters — as lenders prioritised margins over credit growth. Sequentially, NII fell 1.3 percent. However, operating profit rose 24 percent year-on-year and 13 percent sequentially, the best in seven quarters, thanks to improved cost efficiency.

Individually, Axis Bank reported weaker-than-expected results as RBI-mandated provisioning led to a sharp rise in bad loan buffers. Profit and NII growth were muted, fresh slippages rose due to a technical impact, and margins contracted. Brokerages downgraded the stock post-results.

HDFC Bank reported a 12.24 percent rise in standalone profit after tax to Rs 18,155 crore, aided by strong deposit mobilisation and higher other income. Loan growth remained steady and deposits rose 16.2 percent year-on-year, though asset quality deteriorated slightly and NIM fell to 3.35 percent from 3.6 percent a year ago.

ICICI Bank beat expectations across metrics, with stable asset quality and double-digit growth in advances and deposits. Provisions increased, and management flagged potential NIM compression in Q2.

YES Bank saw NII rise 5.8 percent and net profit surge 57 percent year-on-year, reflecting continued recovery.

Reliance Industries

Reliance Industries reported a 77 percent gain in net profit for the June quarter to Rs 30,783 crore, driven by a one-time gain from divesting its stake in Asian Paints. Even after excluding the Rs 8,924 crore gain, profit was up 25 percent year-on-year, as against Rs 15,138 crore in the same quarter last year.

Further, consolidated revenue rose 6 percent to Rs 2.73 lakh crore, while EBITDA climbed 36 percent to Rs 58,024 crore.

Others

Excluding BFSI, IT, and Reliance Industries, 126 listed companies reported just 0.3 percent year-on-year revenue growth to Rs 1.6 lakh crore, with a 7.6 percent sequential decline, as demand remained weak.

Despite this, operating profit climbed to a seven-quarter high, supported by better cost management, operational efficiencies, and lower input costs. Operating profit margin also improved to 14.82 percent — the highest in seven quarters — aided by higher other income and lower expenses.

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