ANALYSIS How TCS, Infosys, HCLTech, Wipro and Tech Mahindra fared in Q1FY26

Infosys beat Street estimates at a time when most of its peers missed. It was the only IT company among the top five to have posted a meaningful incremental revenue growth, at over Rs 1,300 crore in Q1FY26, while the IT sector’s largest player TCS, posted a decline of over Rs 1,000 crore for the quarter.

Focus on operating margins 

A mix of levers helped IT majors expand margins sequentially, barring HCLTech, as companies stayed focused on improving utilisation rates, cutting costs through cautious hiring, delayed wage hike, and even benefitting from cross-currency movements.

HCLTech was the only Tier-I IT firm to see a QoQ as well as YoY plunge in margins. The management highlighted that Q1FY26 is seasonally the weakest for HCLTech, unlike peers who usually post strong first-quarter earnings. HCLTech’s margins came way below their own estimates, driven down by lower utilization rates as it was building capacity in March for specialised skills – as part of organisation-wide restructuring — that is further expected to impact margins in the following quarters. Consequently, HCLTech has reduced operating margin guidance by 100 bps to 17-18% for FY26.

“This utilization drop was also due to a ramp-down in specific areas like automotive. In addition, the people who were released due to productivity benefits could not be redeployed due to skill and location mismatch. The second aspect was a one-off impact from a client bankruptcy. And third and lastly, even though we have been hit by these unforeseen challenges, we remain committed to making investments in AI and go-to-market capabilities,” HCLTech CEO and MD C Vijayakumar told analysts.

IT companies were also seen delaying wage hike cycles, citing an uncertain macro and demand environment, thus deferring the impact of increment on quarterly margins. Only Infosys among the top 5 rolled out wage hikes, while TCS, which usually starts its wage hike cycle by April 1 is yet to make a decision. A similar trend was seen in the commentaries of HCLTech, Wipro and Tech Mahindra, who wouldn’t take a call until October.

While speaking to analysts, TCS CFO Samir Seksaria pointed out that continued investments into people for long-term growth has been one of the key factors in having lower margins despite seeing a sequential increase.

“…if you look at it, the capacity versus the demand contraction mismatch leads to us carrying excess capacity or additional capacity, which should help us in our future demand,” Seksaria said, adding that there’s been a mismatch between demand and supply.

Demand-hiring delinks

IT companies have slowed down hiring amid macroeconomic uncertainties, clouding demand outlook due to US President Trump’s tariff policies, though IT firms continued to report strong deal wins.

Only TCS and Infosys saw a positive headcount addition in Q1, but with a stark difference in the hiring numbers. TCS added 5,090 employees in Q1 while Infosys’ headcount went up marginally by 210 employees.

TCS’ Chief HR Officer, Milind Lakkad, said hiring and demand scenario have started to delink. “Hiring shouldn’t be connected to quarterly growth. It is planned on a yearly basis,” Lakkad said.

“We had earlier hired during the initial quarters then we faced some business challenges. That had caused some imbalance, but we are not that bothered as we will leverage this going forward,” he added.

Tech Mahindra lost about 622 employees during the June quarter, and has no plans for immediate fresher hiring either, though quarterly deal wins have remained strong.

Tech Mahindra’s CFO Rohit Anand said, “We'd hired close to 6,000 last year. So, we are working through the learning development platform absorption of that pool, right, within the ecosystem. So, that's the focus right now. And as we continue to drive more visibility and progress through the macro through the year, we'll drive that action more.”

“As Mohit (Tech Mahindra CEO Mohit Joshi) mentioned, there's a new dynamic around how we look at our employee base collectively from an AI perspective as well, which is an advantage for us given the experience profile we have. So, we'll be evaluating that in a mix of AI, but generally we will hire more as we progress towards the year,” Anand added.

High hopes on H2FY26?

While Q1 has remained muted for IT majors in terms of revenue growth, it diverges from the industry-wide trend of a strong orderbook.

According to Wipro CEO Srini Pallia, the discretionary spend is broadly being seen around data, AI, and modernisation.

TCS CEO K Krithivasan, after seeing a decline in revenue growth, said the second half of the fiscal year should be promising, especially for international business revenue. TCS, however, did point out some delays in deal closures and decision-making.

“As of the international revenue of FY26, I am still confident it will be better than the FY25 international revenue. But we are still trying to push the overall revenue to be much better in the coming quarters. I am still optimistic. This uncertainty cannot last long. The clarity should emerge and spending should come back,” Krithivasan said.

He added, “We are very focused on the emerging markets as well, be it MEA (Middle East and Africa) or APAC (Asia Pacific), or LATAM (Latin America), outside of Australia. We are very keen to diversify our revenue stream as well.”

Tech Mahindra is pinning its hopes on its strong deal pipeline converting into revenue from the second quarter onwards, and then subsequent growth in the second half of the fiscal.

For HCLTech’s C Vijayakumar, “macros will play out differently in different verticals”, and he expects the same to continue throughout the year.

“We are not expecting some recovery in Manufacturing and Life Sciences and Retail & CPG, but at the same time we expect Financial Services and Tech and Services to continue the discretionary spend. So, we are looking at whatever we are seeing now will continue during rest of the year,” he said.

Wipro believes the discretionary spending environment has finally started to stabilise.

“One was hopeful perhaps that the start this calendar year that it would improve, but for the moment I think the way we are looking at this financial year is going to be stable. If we keep that assumption in mind, you should be able to see a much better conversion of some of these bookings into revenue,” Wipro CFO Aparna Iyer told analysts during the earnings call last week.

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