The September quarter has been double whammy for Indian IT, with the industry swaying between weak global demand amid pressures of US President Trump’s tariffs on industries, and most-recently the proclamation on H-1B visa applications.
As India’s largest software exporter Tata Consultancy Services (TCS) gets ready to set to tone for the Q2 earnings season on October 9, along with its second interim dividend for FY26, here are the five key factors to watch out for.
IT Revenue Growth
No surprises or fireworks are expected from TCS in Q2FY26, as brokerages estimate revenue growth of around 0.2-1 percent sequentially in constant currency terms, driven by international business growth of approximately one percent while India business seen as flat.
“We expect cc revenue growth of 1.0% QoQ led by BFSI and Hitech verticals, supported by low base of Q1FY26,” Centrum analysts said in its preview note.
Analysts at Axis Direct said the overall IT sector will see “stronger growth recovery in H2FY26 compared to H1FY26, supported by a more stable environment, deal ramp ups, improved utilisation, and better project execution.”
TCS’ expanded project announced with BSNL in May is likely to ramp up from Q3 onwards, analysts at Motilal Oswal Financial Services (MOFSL) said.
Demand Outlook
TCS has reported strong deal wins in September quarter, including the $640 million contract with the Scandinavian non-life insurance company Tryg.
Analysts believe there have been some green shoots in discretionary tech spending in BFSI and Technology verticals, while Manufacturing, Automotive, Communications and Retail have remained weak.
“Clients remain cautious, leading to longer decision-making times. The focus is on ramping up recently signed deals which are mostly cost optimization/vendor consolidation in nature. The adoption of AI tools is expected to drive revenue per employee thus supporting overall productivity,” analysts at Centrum said.
TCS’ commentary on demand outlook will drive the sector’s narrative forward, as it has the largest order book among the top five Indian IT firms.
The IT sector has been grappling with macroeconomic uncertainties, with Trump tariffs eclipsing tech budgets of US clients.
Wage Hikes, Margin Impact
Brokerage notes have estimated TCS’ operating margins to either remain flat at 24.5 percent or decline by around 20 bps sequentially. This will be driven by the wage hikes rolled out in Q2FY26, higher investments, restructuring costs and lower utilisation, analysts have said.
“We believe pyramid and productivity gains remain key levers, but pricing pressure, client behavior, and the GenAI transition signal a start of realignment as vendors adapt pricing and delivery models,” analysts at MOFSL said in a recent note.
The management’s commentary on operating margins for the second half of the year will be crucial as the company navigates through larger job cuts and projects such as BSNL begin to ramp up.
H-1B Visa Commentary
TCS had earlier said that it has reduced its dependency on US’ H-1B visas to less than 50 percent for offshoring talent in North America over the years, though the company still accounts for a significant share of H-1Bs granted to top tier IT firms.
The recent proposed changes on H-1B visa application and a fee hike, bring the focus back on how TCS plans to tackle the tightening visa regime and what would be the impact on margins if they ought to hire more locally. North America contributes nearly 50 percent to TCS’ revenue.
Layoffs, Impact on Attrition
TCS is currently in the midst of its biggest workforce restructuring, as it plans to trim headcount by 2 percent in FY26. The job cuts have been based on skill redundancies and inability to redeploy certain levels of associates.
All eyes will be on the updates pertaining to these layoffs and how they are showing up in the company’s attrition rate in Q2 and beyond. TCS is also offering severance packages to the impacted employees which could lead to cost increases.
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