The Indian IT services industry has delivered a steady performance in the September 2025 quarter, with nearly half of the leading players exceeding revenue forecasts and a majority meeting or surpassing margin expectations. Despite subdued discretionary technology spending, the sector is showing signs of resilience and improving deal execution, suggesting that it may be approaching the trough of its demand cycle. Deal ramp-ups, favorable seasonality, and early benefits from cost optimization programs have supported sequential revenue growth.
The management commentary has pointed to stable client budgets and a gradual pickup in spending in select verticals, indicating an improving tone after several quarters of muted demand. Although visibility for the second half remains cautious, the sector appears better positioned to weather near-term volatility. Profitability trends have been encouraging, aided by currency tailwinds, workforce rationalization, and productivity gains.
The industry is entering an important transition phase as enterprises move from AI experimentation to implementation. Historical patterns show that service growth typically follows major hardware and platform shifts, and with AI infrastructure and use cases maturing, early enterprise adoption is beginning to accelerate. The report indicates that broad-based AI-led revenue opportunities may start to materialize over the next 18-24 months, paving the way for a new growth cycle.
The sector’s readiness, strategic investments, and expanding pipeline of transformation deals position it well for medium-term growth. Valuations are near long-term averages, suggesting room for re-rating as earnings visibility improves. Overall, the report underscores a sector in stabilization mode, with improving execution, resilient margins, and a medium-term catalyst emerging from AI adoption.
Two companies, HCL Technologies and Coforge, have been highlighted as top picks in the IT sector. HCL Technologies delivered a strong 2QFY26, with revenue up 2.4% QoQ CC, ahead of estimates, and EBIT margin at 17.4%. The company has upgraded its Services growth guidance to 4-5% YoY CC, reaffirming steady execution. Coforge reported 5.9% QoQ CC revenue and 18% QoQ PAT growth, with a robust EBIT margin of 14%. The company’s consistent quarterly deal wins and Cigniti-led cross-selling synergies are fueling robust momentum, and management targets 20 large deals in FY26.
The author recommends a “buy” rating for both HCL Technologies and Coforge, with target prices of Rs 1800 and Rs 2400, respectively. The expected upside for HCL Technologies is 16%, while Coforge is expected to deliver an upside of 33%. The author believes that these companies are well-positioned to benefit from the emerging trends in the IT sector, including the adoption of AI and the increasing demand for digital transformation services.