Amid all the geopolitical noise, investors’ focus is slowly shifting to the December quarter (Q3FY26) earnings. Setting the tone, the Indian IT players will start disclosing their Q3 results next week amid high expectations that the spell of weak earnings of the last several quarters will be broken in Q3. TCS and HCL Tech will report their Q3 numbers on January 12, while Infosys will announce its December quarter results on January 14.
IT sector Q3 results preview
The December quarter is a seasonally weak quarter for the IT companies due to furloughs. Consequently, growth could slow. However, the market’s increased focus will be on management commentaries and signals on demand, AI trends, and whether the worst is behind or not.
According to brokerage firm Motilal Oswal Financial Services, seasonal furloughs may weigh on growth in Q3FY26.
“We think markets are likely to look through this seasonality and instead focus on signals around the demand environment from client budgeting for the calendar year 2026. Amid macro-tariff uncertainty and a new tech cycle, we believe clients remain cautious about committing incremental spending to large programs. As a result, we expect demand to stay steady, at best marginally incremental, until January 2026 as planning cycles reset and budgets firm up,” said Motilal Oswal.
Motilal expects sequential constant currency growth to be in the range of 0.3% to 2.3% for large-caps. Mid-caps may outperform once again with a growth range of -2.5% to 3.5%.
Besides, the brokerage firm expects aggregate revenue for its coverage universe to grow by 7.7% YoY, while EBIT and PAT may grow by 7.2% and 7.6% year-on-year, all in INR terms, respectively.
On the other hand, brokerage firm Nirmal Bang expects across-the-board growth, with tier-I players to report 1.4% to 1.5% constant currency revenue growth, while tier-II players may see 0.5% to 3.0% constant currency growth due to better TCV (total contract value) growth.
Nirmal Bang said margins may see some pressure due to wage hikes in Q3 and some spillover from Q2, pricing pressure, seasonality, and an increase in subcontractor costs as local hiring increases.
TCV may remain range-bound for the industry, with most players expected to announce consistently stable numbers as the quarter was able to clear out a few uncertainties with respect to tariff impacts and H1B visa costs, Nirmal Bang said.
Sumit Pokharna, VP- Fundamental Research at Kotak Securities, believes demand has remained broadly on expected lines in the past couple of quarters with furloughs at normal levels.
“We expect moderate performance in a seasonally weak Q3 quarter for IT services companies,” said Pokharna.
Pokharna said Tech Mahindra remains on track to achieve its stated margin aspirations by FY27. He expects Persistent and Coforge to continue to lead among mid-tier companies, with 3.9% and 3.3% QoQ growth, respectively. Sagility may outperform, aided by seasonal strength, Pokharna said.
Vinit Bolinjkar, the head of research at Ventura, highlighted that Q3 brings seasonal challenges like furloughs and wage hikes for IT companies, but some stand out with strong order books and execution discipline.
IT stocks to buy
Bolinjkar said investors can consider (i) Persistent Systems for its steady growth and AI platform wins, (ii) Coforge for large order book and stable margins, (iii) LTIMindtree due to good value and manufacturing recovery, (iv) Netweb Technologies due to AI systems growth, and (v) Tech Mahindra for product strength and BFSI momentum.
“These have better downside protection than most peers and potential to beat expectations. Focus on companies providing execution quality and maintaining guidance. From a risk-reward perspective, select mid-cap IT stocks offer superior upside potential going into FY26,” said Bolinjkar.
Tech Mahindra, Coforge, Sagility, Indegene and TCS are Pokharna’s top picks.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.