India's Top IT Firms Beat Expectations in Q2 FY26, Driven by AI and Strong Deal Flow

Heading: IT Sector Performance Q2 FY26 India's major IT companies, including Tata Consultancy Services (TCS), Infosys, HCLTech, Wipro, Tech Mahindra, and LTIMindtree, have delivered stronger-than-anticipated results for the second quarter of fiscal year 2026 (Q2 FY26). This performance was achieved despite ongoing headwinds such as US tariffs and increased H-1B visa fees. All six firms reported sequential revenue growth in constant currency terms, robust order bookings, and sequential improvements in profit margins. Key drivers for margin expansion included a 3% depreciation of the Indian Rupee and a higher proportion of work done from offshore locations. LTIMindtree and HCLTech led with a 2.4% margin growth, followed by Infosys (2.2%), Tech Mahindra (1.6%), TCS (0.8%), and Wipro (0.3%). LTIMindtree saw a 156-basis-point margin expansion, while HCLTech improved by 109 basis points. Infosys reported an EBIT margin of 21%, with TCS maintaining its industry-leading position at 25.2%. The adoption of Artificial Intelligence (AI) is significantly fueling the sector's growth. Enterprise AI is moving from pilot stages to monetization, with companies like Infosys seeing substantial productivity gains. HCLTech became the first Indian IT firm to report over $100 million in advanced AI revenue in a quarter. LTIMindtree's AI platform, BlueVerse, is also gaining traction. Analysts at Anand Rathi foresee long-term growth from AI-led deal wins and increased enterprise AI investments. Total Contract Value (TCV) for deal wins remained strong, with TCS securing $10 billion, Infosys $3.1 billion (including a significant UK NHS contract), and Wipro $4.7 billion. Hiring has remained cautiously positive, with major firms adding employees. Attrition rates have eased. TCS is undertaking a restructuring affecting about 1% of its workforce, incurring an expense for Q2 FY26. US H-1B visa rule changes are expected to have minimal impact due to increased localization efforts. Infosys and HCLTech have raised their FY26 growth guidance, signaling confidence. Anand Rathi maintains a positive outlook on the sector, with LTIMindtree, Infosys, and HCLTech identified as top investment picks. Impact: This news is highly positive for the Indian IT sector, indicating resilience and strong growth potential, which can lead to increased investor confidence and potentially higher valuations for these companies and related stocks. Rating: 8/10. Difficult Terms: * Q2 FY26: The second quarter of the Indian fiscal year 2026, typically covering July to September. * Sequential Revenue Growth: An increase in revenue compared to the previous quarter. * Constant Currency Terms: Revenue growth calculated without the impact of fluctuations in foreign exchange rates. * Order Bookings: The total value of contracts secured by a company that are yet to be executed. * Margins: The difference between revenue and costs, indicating profitability. * Basis Points (bps): A unit of measure equal to one-hundredth of a percentage point (0.01%). * EBIT Margin: Earnings Before Interest and Taxes margin, a measure of a company's operating profitability. * Enterprise AI: Artificial intelligence solutions adopted by businesses for their operations. * Monetization: The process of converting an asset or service into money. * Productivity Gains: Improvements in efficiency leading to more output with the same or fewer inputs. * TCV (Total Contract Value): The total value of a contract over its entire duration. * NHS: National Health Service, the publicly funded healthcare system in the UK. * Attrition: The rate at which employees leave a company. * Localization: The process of hiring and using local talent and resources in a country where a company operates. * Nearshore Delivery Centres: Operations or facilities located in a nearby country, often in a similar time zone, to provide services. * CAGR (Compound Annual Growth Rate): The average annual growth rate of an investment over a specified period, assuming profits are reinvested.