Indian Mid-Tier IT Firms Set to Outpace Giants in FY26 Growth

India's mid-tier IT service providers, including LTIMindtree Ltd, Coforge Ltd, Mphasis Ltd, Persistent Systems Ltd, and Hexaware Technologies Ltd, are anticipated to outperform their larger counterparts for the second year running in FY26. These companies are demonstrating robust growth, healthier margins, and stronger order books, even as the broader Indian IT sector faces muted global demand.

In the first half of FY26, LTIMindtree, Coforge, Mphasis, Persistent Systems, and Hexaware Technologies reported revenues aggregating $2.3 billion, $904 million, $882 million, $796 million, and $777 million respectively, with year-on-year growth rates ranging from 3% to 36.8%. Notably, all five grew faster in H1 FY26 compared to the same period last year, exceeding the pace of major competitors like Tata Consultancy Services and Wipro, both of whom saw revenue declines. Infosys Ltd and HCL Technologies Ltd were among the few large firms that managed to accelerate their growth.

Despite challenges such as US visa uncertainties and AI-led pricing deflation, mid-tier firms attribute their success to agility, leaner delivery structures, and a strategic focus on AI and engineering-driven opportunities. They are less burdened by legacy systems and large, slow-moving deals that can affect Tier 1 companies. Executives from Coforge and Persistent Systems expressed optimism for a strong second half of FY26, citing positive trends in their core verticals and robust pipeline.

Furthermore, four of the five mid-cap companies expanded their operating margins in H1 FY26, defying the typical trade-off between growth and profitability. This resilience is partly due to their focus on mid-sized clients ($1-10 billion), a segment growing twice as fast as larger enterprises.

**Impact** This trend significantly impacts investors by highlighting potential growth opportunities in mid-cap IT stocks, which have shown stronger recent stock performance compared to their larger peers. It suggests a shift in competitive dynamics within the Indian IT sector, with agility and specialization proving more effective in the current economic climate. The continued outperformance by mid-tier firms could lead to increased investor interest and potentially higher valuations for these companies, while large caps might need to adapt their strategies to regain momentum.

**Impact Rating:** 8/10

**Difficult Terms:** * **FY26:** Financial Year 2025-2026. This refers to the accounting period from April 1, 2025, to March 31, 2026. * **Margins:** Profitability, usually expressed as a percentage of revenue. Higher margins mean the company keeps a larger portion of its revenue as profit. * **Order Books:** A record of unfulfilled customer orders. A healthy order book indicates future revenue streams and business stability. * **Pecking Order:** A ranking or hierarchy, in this context, referring to the size and influence of IT companies. * **Headwinds:** Factors or conditions that hinder progress or growth. * **AI-led pricing deflation:** A situation where the cost of IT services or products decreases because Artificial Intelligence (AI) makes their delivery or optimization more efficient. * **Agility:** The ability of a company to respond quickly and effectively to changes in the market or client needs. * **Verticals:** Specific industry sectors in which a company provides its services (e.g., banking, insurance, travel). * **Basis points:** One-hundredth of a percentage point (0.01%). For example, a 70 basis point margin expansion means the margin increased by 0.70%. * **GenAI:** Generative Artificial Intelligence. A type of AI capable of creating new content, such as text, images, music, or code. * **H1/H2:** First Half and Second Half of the financial year. * **Leaner delivery structures:** More efficient operational models that use fewer resources to deliver services. * **Pivoting:** Changing strategic direction or focus, often in response to market shifts. * **Legacy transformation programmes:** Projects aimed at updating or replacing old, outdated IT systems with modern solutions. * **Data modernization:** The process of updating and improving how data is stored, managed, processed, and accessed. * **Cloud orchestration:** The process of managing and automating cloud computing services and resources. * **Macro conditions:** Overall economic factors and trends that affect businesses and markets globally or nationally. * **Value proposition:** The unique benefit or set of benefits that a company promises to deliver to its customers. * **Fiscal:** Relating to financial matters, often referring to a specific financial year or government budget.