Report: IT companies’ Q3FY26 earnings are projected to show muted sales growth, but margins will remain strong
Report: According to a Centrum analysis, despite strong operational performance, revenue growth for Indian IT services businesses is anticipated to be modest in the third quarter of the current fiscal year 2026.
The Q3FY26 earnings season, which is scheduled to start next week, is preceded by the report.
According to the research, revenue growth for the quarter is expected to be moderate but robust, bolstered by strong growth in a few sectors, including technology and banking, financial services, and insurance (BFSI). Performance is also anticipated to benefit from the increase in newly signed contracts.
Overall growth, however, is probably going to be muted, with Tier 2 IT firms anticipated to outperform Tier 1 firms throughout the quarter.
It said “Revenue growth to remain muted with select Tier 2 outperforming Tier 1 companies”
The analysis predicts that Tier 1 IT businesses’ revenue increase in Q3FY26 would be between +0.2% and +1.7% quarter-over-quarter in US dollars.
According to the research, during Q3FY26, the Indian rupee declined by around 2.1% on a quarter-over-quarter basis vs the US dollar, which is anticipated to boost reported revenue growth based on INR.
For firms that were covered, cross-currency headwinds during the quarter were between 20 and 40 basis points.
According to the research, operational margins should be relatively stable. Even as businesses deal with decreased utilization owing to furloughs and a traditionally bad quarter, the rupee’s 2.1% fall versus the dollar is expected to benefit profitability. Furloughs and fewer working days usually influence Q3, which has an effect on sector-wide utilization levels.
According to the survey, IT organizations are still concentrating on cost-control methods including raising utilization, optimizing subcontracting costs, enhancing the staff pyramid, and other efficiency measures.
Even while businesses continue to spend in developing their skills in cutting-edge technology, these actions are intended to ensure margin stability.
The demand climate hasn’t altered much in the last three months, the study said.
During the quarter, increasing newly signed deals—which are primarily motivated by cost optimization and vendor consolidation—remains the primary emphasis.
The survey also said that in Q3FY26, IT services firms’ total productivity is projected to be supported by the deployment of AI technologies, which are expected to increase revenue per employee.