Indian IT Sector Wraps Up Q4 on a Muted Note, Treads Cautiously Discretionary spending continued to be under pressure for Q4 and is expected to remain low in the near future.

Top Indian IT services companies like Tata Consultancy Services (TCS), Infosys, HCLTech, and Wipro have all reported sequential revenue decline in their recently-concluded fourth quarter earnings. Infosys posted the sharpest sequential decline at 3.5 per cent in constant currency, while TCS, Wipro, and HCL Tech each saw their revenues dip 0.8 per cent.

While many of these firms expected an improvement in discretionary spending by clients, the impact of Trump tariffs and global uncertainties weighed in. Discretionary spending continued to be under pressure for Q4 and is expected to remain low in the near future.

"We have seen instances of delays in decision-making and discretionary spending has come under heightened scrutiny and pressure recently. We remain close to our customers to understand how these changes are impacting them directly or indirectly," K. Krithivasan, CEO and MD, TCS said in a post earnings call.

"The (deal) pipeline is strong, but the clients are cautious about the spend, especially BFSI, which is discretionary, right? So, the early signs are they are waiting and watching. Some of the decisions have slowed down, if you will," Srinivas Pallia, CEO and MD, Wipro said in a post earnings call.

"Retail sector has been impacted by economic uncertainty resulting in lower consumer spending in core markets. Due to recent tariff announcements, client budgets are expected to be tightened and there is increased caution. Decision cycles are getting stretched for discretionary spend and large deals. Across geos, there is increased focus on AI, cloud, estate modernization, cost takeout and investing in core tech capabilities," said Jayesh Sanghrajka, CFO, Infosys.

Going forward, the sector is treading cautiously. In terms of guidance, Infosys has forecast a revenue growth of 0-3 per cent for full fiscal FY26 reflecting an uncertain but steadily improving business environment. Wipro, which guides for the quarter ahead, has revised its sequential revenue growth guidance for the first quarter ended June to -3.5 per cent to -1.5 per cent in constant currency as clients take a cautious approach on large transformational deals and discretionary spending amid US President Donald Trump's increase in tariffs.

"The reason that we gave a 3-point guidance band was because there is an uncertainty. So, at the lower end of the guidance, we have baked in some further deterioration in the environment. And at the top end of the guidance, we have baked in steady to marginally improving environment. So that is how the guidance has been panned out from the environment perspective," said Sanghrajka.

"Having said that, on the ramped downs, we have not really seen any major ramped downs at this point in time or major closures of the deals, we do see clients being cautious that decision making is delayed in pockets. But as I said, what we see today has been baked in in the lower end of the guidance from the uncertainty perspective," he added.