IT Sector Faces Lingering Visibility Concerns Amid Steady Deal Pipelines

IT Sector Struggles with Predictable Growth as Deal Wins Falter

A month before earnings, brokerage house JPMorgan warned that revenue guidance would be the key metric to watch for visibility in the IT sector, cautioning that it could be the weakest in nearly a decade. The March quarter (Q4FY26) results have done little to change that.

Tata Consultancy Services (TCS), HCLTech, and Wipro, the three major IT companies, have steady deal pipelines, but management commentary and guidance suggest that converting those wins into predictable growth remains a challenge. Wipro CEO Srinivas Pallia highlighted weak near-term visibility after the quarterly results, stating that the company has guided for -2 percent to 0 percent sequential growth for Q1, largely due to client-specific issues and delayed ramp-ups.

Comparison of Guidance and Expectations

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The shift from earlier management commentary is telling. At the start of FY25, companies had issued cautious guidance amid a persistent slump in discretionary spending. A year later, by the end of Q4 FY25, despite record deal pipelines and a surge in Gen AI interest, revenue guidance for FY26 has turned even more conservative due to macroeconomic headwinds and delayed project starts.

HCLTech explicitly flagged reduction in discretionary spend as a key driver of its Q4 miss. Wipro pointed to delayed ramp-ups and execution timing issues. Even TCS, while more stable, is seeing only incremental improvement rather than a broad-based recovery.

The common thread is that execution timelines have become less predictable, even when deals are being signed. Guidance takes center stage, but disappoints. Wipro guided for -2 percent to 0 percent sequential growth for Q1FY27, weaker than Street expectations and below its earlier trajectory. The company's management attributed this to "client-specific issues" and "delayed ramp-ups in certain deals," highlighting that even signed contracts are not translating into immediate revenue.

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HCLTech's 1-4 percent FY27 growth guidance also came in below expectations, with the company effectively assuming no recovery in discretionary demand and factoring in client-specific headwinds. Vijayakumar said the company is "building multiple scenarios," highlighting the lack of clear visibility.

TCS struck a relatively more confident tone, with Krithivasan pointing to "better growth visibility" backed by strong deal wins and a healthy pipeline. However, even here, expectations remain measured, with growth likely to stay in mid-single digits rather than accelerate sharply.

Deal wins hold, but momentum uneven. TCS reported $12.2 billion in Q4 TCV, broadly steady year-on-year, with full-year deal wins at $40.7 billion. Nevertheless, IT behemoth, for the first time since it went public in 2004, reported a 0.5 percent year-on-year decline in USD terms in FY26 revenue growth. CEO K Krithivasan said demand visibility is improving, adding the company is seeing "good traction across markets and continued customer commitment to technology investments," even as the macro remains uncertain.

HCLTech, however, saw net new deal wins fall 35 percent YoY to $1.9 billion during the quarter. CEO C Vijayakumar maintained that demand is intact but flagged the environment as "volatile," with growth coming amid "lower discretionary spend and delayed decision making." Wipro's deal momentum also weakened. In Q4, the company reported $3.5 billion in bookings, down 13 percent YoY, with large deal wins of $1.4 billion declining 18 percent YoY.

Taken together, the data suggests that while pipelines remain steady, the pace and quality of deal wins are no longer uniformly strong.