Infosys, Wipro and LTIMindtree deliver steady growth in Q2, but Goldman warns AI shift could limit valuations

Indian IT companies Infosys, Wipro and LTIMindtree delivered steady growth in the second quarter, with consecutive revenue increases across the board, Goldman Sachs said. While deal momentum and early signs of demand stabilization point to a soft recovery ahead, brokers warn that AI-driven productivity gains and subdued discretionary spending could keep sector valuations under pressure.

“While there are early signs of demand stabilization, visibility into CY26 remains poor, and company commentary suggests AI-related productivity pass-throughs could become more mainstream, keeping many people depressed,” Goldman analysts said in a report.

The brokerage’s latest report highlights that all three companies achieved sequential revenue growth in the second quarter of FY26, suggesting some stability is returning to technology budgets among global customers.

Infosys led the group with a 2.2% increase in quarterly revenue, including inorganic contributions, accompanied by an 8% year-on-year increase in underlying earnings before interest and taxes.

Although the company has entered into a multi-year, large-scale outsourcing deal, management has opted to raise only the lower end of full-year growth expectations, now at 2 to 3%. This review is rooted in concerns that several ongoing contracts are still being phased out and the uncertain recovery of demand in key regions.

The company has expanded its workforce by about 2.5% as it gears up for new projects, even as discretionary IT spending remains unpredictable. LTIMindtree reported a slightly higher quarterly revenue growth rate of 2.4%, although this fell slightly short of analyst expectations. Nevertheless, the Bengaluru-based company has delivered robust margin expansion, with EBIT up 13% over the past year and sequential operating margins up 160 basis points, a sign of efficient cost management. LTIMindtree’s optimistic outlook stands out: it expects to achieve USD revenue growth of almost 10% this fiscal, a pace that outpaces most Indian peers. Still, the company acknowledged a decline in revenue at its top accounts, attributing this directly to productivity gains from advanced AI tools. Wipro, for its part, saw more muted momentum, with quarter-on-quarter revenue growth of just 0.3%, flat EBIT performance and next quarter expectations marginally below market consensus. Management noted continued pressure on margins, likely because new deals take time to scale and become profitable.

Despite broad-based sequential growth, the sector continues to exhibit vertical divergence, with retail IT spending lagging behind, while most other industry segments remain resilient. Currency fluctuations and operational efficiencies helped all three companies boost margins during the quarter. However, investor sentiment remains cautious. Goldman Sachs notes that while LTIMindtree and Tech Mahindra are currently commanding higher earnings multiples, Wipro is trading at the lower end of the sector valuation, reflecting continued growth and margin concerns.

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According to the report, upside risks exist if global IT budgets recover faster than expected or if efficiency improvements continue to drive margin expansion. Still, the long-term trajectory will depend on how quickly discretionary technology spending returns and how deeply AI-led transformation will change the revenue and cost structure for Indian technology majors. For now, investors are advised to watch for continued signs of a broad-based recovery as the sector continues to seek a delicate balance between cost discipline and competitive growth ambitions.

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