Client Caution Weighs on India's $280 Billion Tech Services Industry
Infosys, TCS and Wipro report disappointing results as Trump tariffs and economic headwinds prompt corporate caution
India’s three largest IT services companies are facing their steepest growth slowdown in years as corporations curtail large technology projects amid global economic uncertainty and geopolitical challenges.
Infosys, the country’s second-largest IT services provider, on Thursday forecast revenue growth of just 0-3% for the fiscal year through March 2026, far below analysts’ expectations of 6.3%. The guidance follows a quarter where net income fell 12% to $823 million, though this exceeded analyst estimates of $780 million.
The disappointing outlook echoes similar concerns from rivals Tata Consultancy Services and Wipro, as US President Donald Trump’s tariff policies add fresh headwinds to an industry already struggling with cautious client spending.
"Going from FY25 to FY26, the uncertainties have dramatically increased," Wipro chief executive Srini Pallia told reporters after forecasting a sequential revenue decline of 1.5-3.5% for the first quarter. He added that the huge trade between Europe and the US, coupled with the impact on European clients because of tariffs against China, will have an adverse impact going forward.
Industry leader TCS last week missed fourth-quarter earnings estimates after posting net income of $1.43 billion for the quarter through March. Analysts had predicted $1.49 billion on average. “We are observing delays in decision making and projects starting with respect to discretionary investments,” said K. Krithivasan, TCS chief executive, adding there were no major project cancellations.
The struggles reflect a profound challenge for India’s $280 billion technology sector, which has historically outpaced global economic growth. Shares in all three companies have plummeted this year, with Infosys down 24.5%, TCS falling 21% and Wipro dropping by a similar amount.
Even though Indian outsourcers aren't directly hit by Trump’s tariffs, their customers are becoming increasingly cautious about large technology expenditures. North America, which accounts for nearly 60% of revenue for companies like Infosys, shows persistent softness, with analysts noting increased buyer hesitancy compared to previous quarters.
Cost pressures are evident in workforce decisions as well. After years of aggressive hiring, Indian IT giants are now rethinking compensation strategies. Wipro announced that wage hikes for fiscal year 2026 would be decided “closer to the date” based on business conditions, following TCS’s similar deferral of salary increases.
Despite these challenges, company executives are attempting to highlight resilience. “Our depth in AI, cloud and digital and strength in cost efficiency, automation, and consolidation position us well for the needs of our clients,” said Salil Parekh, Infosys chief executive.
The macroeconomic environment provides little comfort. JPMorgan's conversations with executives, deal advisors and consultants across India’s technology hubs reveal growing concern that AI-driven efficiencies are fuelling pricing pressures, threatening to constrain medium-term industry growth to a modest 4-5%, with little prospect of acceleration into fiscal year 2026.
Wipro, which counts Volkswagen and Yamaha as clients, saw revenue from its energy resources and manufacturing segment fall 7% in the quarter. Its consolidated revenue rose 1.3% to $2.63 billion, but missed analyst estimates.