According to Bloomberg Business, the upcoming earnings season for major IT firms is expected to be muted but could offer clues for a 2026 rebound. Tata Consultancy Services (TCS) is forecast for a 2.2% revenue contraction in constant currency, while Infosys is expected to maintain its 2%-3% annual growth guidance. Meanwhile, Taiwan Semiconductor Manufacturing Co. (TSMC) is projected to post a 23% rise in Q4 net income, with a bullish 2026 outlook. Key details to watch include TCS’s AI strategy following its acquisitions of ListEngage and Coastal Cloud, HCL Tech’s software-driven 4% growth cushioning margins, and Tech Mahindra’s aim for a 15% margin by FY2027. The overall signal investors want is whether client budgets for 2026 are firming up, potentially ending the sector’s slump.
The AI Acquisition Spree and the Waiting Game
Here’s the thing: everyone’s talking about AI, but the big money from it for these IT services giants is still mostly on the horizon. That’s why the acquisition moves by TCS and others like Coforge are so telling. They’re not just hiring AI experts; they’re buying whole firms to bolt on that expertise fast. It’s a clear signal they’re prepping for a demand wave they see coming. But even the analysts at Motilal Oswal say that meaningful AI services demand might not really kick in until mid-2026. So this earnings season is less about AI revenue today and more about proving they have a credible, bought-and-paid-for roadmap for tomorrow. The commentary around these small acquisitions will be scrutinized way more than the actual financial impact this quarter.
TSMC: The Real Canary in the Coal Mine
Forget the Indian IT guidance for a second. If you want to know where the tech world is *actually* headed, watch TSMC. Their bullish outlook and planned capex increases through 2028 are the ultimate vote of confidence in the AI hardware build-out. They’re the foundational layer. All those GPUs and AI chips everyone’s fighting over? They’re made by TSMC. So when they say they’re scaling advanced-node capacity, it means they’re seeing orders that justify billions in investment. That demand eventually trickles down to the software and services firms like TCS and Infosys who help enterprises implement this stuff. TSMC’s strength is a leading indicator; the Indian IT commentary on future budgets is the lagging confirmation. If both are positive, that’s a powerful one-two punch for the sector.
The Margin Squeeze and the Headcount Puzzle
This is where it gets messy. The quarter is seasonally weak with furloughs, which hurts revenue and efficiency. Firms have been conserving margins by keeping headcount flat or even slightly down, as Bloomberg Intelligence notes for Infosys. But now, estimates suggest headcount growth might be coming back. That’s a double-edged sword. Is it a confident bet on future demand, or a risky cost increase before the revenue actually materializes? Tech Mahindra’s goal to hit 15% margins by FY2027 shows how much pressure there is to improve profitability after a tough period. They might cut subcontractor costs to get there. It’s a delicate balancing act—positioning for growth without spooking investors with rising costs. The “guidance” everyone’s looking for is really about confidence. Are these companies willing to spend money on people again because they see concrete signs of life in client boardrooms? We’re about to find out.
