As the July-September quarter looms, India’s IT services firms are bracing for another muted financial performance, with growth expectations pinned down by weak demand, client budget constraints, and renewed uncertainty following changes to U.S. H-1B visa rules.
Once a strong period for the industry, Q2 is now expected to deliver only modest gains, if any, amid a cautious global environment.
Across the board, analysts foresee single-digit growth or flat sequential expansion in constant currency terms for large-cap Indian IT players.
The continuing pressure is attributed to macroeconomic headwinds coming out of developed economies, especially the United States.
Client organisations are holding back on discretionary spending and large-scale transformation projects, opting instead to prioritise cost optimization and bandwidth reduction. Many firms that had leveraged upticks earlier in the year say the momentum has dissipated. The sector’s reliance on the U.S. market only compounds the challenge.
The newly imposed $100,000 one-time fee for H-1B visa applications has triggered renewed concerns. Indian IT companies, major deployers of H-1B professionals in the U.S., view the change as a potential disruptor to existing staffing and project continuity.
Industry bodies have warned that the policy could introduce significant operating cost pressures, especially for nearshore models that depend on moving talent across geographies. Though the U.S. has clarified that the fee applies only to new applications and not renewals or existing holdings, the shift raises questions about recruitment plans, visa dependency, and localization strategies.
One of the sector’s largest names, TCS, is scheduled to kick off the earnings season under this cloud of uncertainty. The company is expected to report a slowdown in revenue growth in constant currency terms, as client hesitation and visa-related cost burdens weigh on margins and operating models. Firms are particularly under scrutiny for their staffing plans, offshore vs onshore balance, and ability to localize talent in the face of visa constraints.
Margins may see some resilience through exchange rate tailwinds as the rupee depreciates, but that cushion is expected to be offset by wage inflation, pricing pressures, and rising cost of talent deployment. Most firms are believed to be operating at relatively high utilization levels, limiting further room for productivity gains through existing capacity.
Analysts expect that the near-term focus will remain on deal wins in infrastructure modernisation, cloud migration, and AI adoption, but conversion and execution timelines may stretch as clients remain cautious.
Mid-tier and niche IT firms might outperform their larger peers slightly, as they are often more agile and able to pivot toward smaller, more modular engagements. Some of them have already been gaining traction in automation, AI, and digital engineering mandates.
Looking ahead, meaningful recovery for the sector is seen by many as a possibility only in the next technology cycle, potentially 12 to 18 months out. For now, expectations are that the industry will tread carefully, lean on cost controls, and await clearer visibility in client pipelines and macro stability. The H-1B policy change, while disruptive, is also pushing companies to rework their global staffing models — an adjustment that could reshape future operating norms, even if it deepens the jitteriness of the current quarter. The coming weeks will be critical to see how firms manage to navigate these layered headwinds and whether they can deliver performance with limited tailwinds.