Q3 Results Preview: Here's How IT stocks may fare during the quarter as per Motilal Oswal

Shares of Infosys Ltd., Tech Mahindra Ltd., Coforge Ltd. and Hexaware Tech Ltd. are brokerage firm Motilal Oswal's top picks within the Indian IT space, ahead of the quarterly results season that begins later this week.

In its recent note on IT stocks, the brokerage has focused on looking beyond the upcoming third quarter numbers.

Motilal Oswal's note states that after some respite in the second quarter on beaten-down expectations, it expects seasonal furloughs to weigh on growth in the third quarter. It thinks 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, it said.

Also, amid macro-tariff uncertainty and a new tech cycle, it believes clients remain cautious on committing incremental spending to large programmes. As a result, it expects demand to remain steady, at best marginally incremental, until January 2026 as planning cycles reset and budgets firm up, it added.

The third quarter results are likely to mirror this set-up, it said, with quarter-on-quarter constant currency growth expected in the 0.3% to 2.3% range for large caps. Midcaps are expected to outperform again with a growth range of -2.5% to 3.5%, according to the brokerage.

Calendar year 2026 should represent the bottoming of the growth cycle, setting the stage for a more meaningful acceleration in the second half of the financial year 2027 and FY28 as AI services moved into scaled deployment, Motilal Oswal said.

It said the early signs of AI strategy formation are emerging with IT companies investing in AI-led capabilities via acquisitions and partnerships. It expects the momentum to build over the next six months, with AI services demand inflecting into the calendar year 2026, the analyst said.

Top Picks 

Among large cap IT stocks, Motilal Oswal prefers Infosys and Tech Mahindra, while it prefers Coforge and Hexaware Tech among the Midcap names.

Here's a look at how these companies are likely to fare during the quarter:

Infosys: Revenue growth may remain flat in CC terms due to seasonal furloughs, and H2 being weaker than H1. US BFSI may remain resilient, operating margins may remain flat. Management likely to maintain its guidance.

TCS: Expect revenue growth of 0.5% sequentially in CC terms with a 30 bps decline in EBIT margins due to a two-month impact on wage hikes, steady ramp-up of BSNL deal and redundancy related costs. Outlook on near-term demand, client tech budgets, AI data centers and deal wins will be key to watch.

Tech Mahindra: Expect sequential revenue growth of 0.5% in CC terms as furloughs impact growth partially. Margins may improve by 60 basis points with Europe picking up traction again. FY27 outlook, client mix and communication vertical will be key two watch.

Wipro: IT services business may see 1.5% constant currency growth driven by one-month inorganic contribution from the Harman acquisition. Margins may remain in a tight range due to headwinds from Phoenix deal and partial dilution due to Harman acquisition. Commentary on ramp-up of deals won, hiring to support those ramp-ups and growth synergies from deals will be key to watch.

Coforge: Expect 3% sequential growth in constant currency revenue due to furlough impacts. Expect 70 bps decline in EBIT margin led by wage hikes and partly offset by lower ESOPs and other expenses. Commentary on organic growth momentum, further clarity on Encora integration and its EPS-accretion, demand environment in BFSI, among key things to watch.

Cyient: Expect 1% sequential constant currency growth in DET business. External environment is challenging and this quarter may see stabilization. Commentary on large deal execution, margin gains, Semcon business and recent acquisitions, deal wins are some key monitoring factors.

HCLTech: Motilal Oswal expects 2.3% sequential constant currency revenue growth driven by seasonal tailwinds in its products business. Full year CC growth of 4% and organic growth of 3.3% is anticipated, in-line with the management's guidance of 3% to 5% growth. Expect the company to retain its guidance and margins to improve by 70 basis points.

Hexaware Tech:

Constant currency revenue may decline 2.5% sequentially due to lower license revenue in addition to regular furloughs, fewer working days and government shutdown in the US. CyberSolve acquisition to have a two-month impact in Q3. Commentary on demand trends, deal wins, BFS ramp-up, among key things to watch.

Analyst recommendations

Here are the other analyst recommendations on Motilal Oswal's top picks:

Stock	Buy	Hold	Sell
Infosys	37	12	2
Tech Mahindra	25	9	12
Coforge	28	4	6
Hexaware Tech	13	1	1

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