Indian IT services firms closed Q4 on uneven footing, with growth increasingly concentrated in AI-led, non-discretionary segments such as BFSI, energy, and life sciences, even as manufacturing, telecom, and retail dragged under macro and tariff pressures. While North America remained broadly resilient, Europe is emerging as the next growth lever on sovereign AI and regulatory-driven demand, marking a shift in regional momentum.
Elara Capital noted a mixed Q4 for Indian IT majors, with growth concentrated in select verticals and regions. TCS saw North America-led growth, with BFSI, energy, and tech holding up on AI-led modernisation, while communications and utilities lagged. Infosys was driven by Europe and North America, with BFSI and energy strong, but manufacturing, retail, and communications under pressure from macro and tariff uncertainty.
Wipro’s growth was led by Europe and APMEA, though BFSI weakness in the Americas and cautious consumer and healthcare spending weighed. HCLTech saw traction in tech and BFSI but declines in telecom, retail, and manufacturing, with the US steady and Europe soft. Overall, the Americas remained resilient, Europe uneven, and India/RoW stronger, while AI-led and non-discretionary spends continued to outperform broader discretionary demand.
“BFSI has emerged as the clear frontrunner, with Persistent’s BFSI vertical growing 28.4 per cent in FY26 on a full-year basis at a $600M annualised run rate, driven by top-four wins across US and India banks. Infosys’s Q4 call noted financial services and EURs grew above the company average. BFSI started AI-led modernisation 18 to 24 months ahead of other verticals, began data-readiness and cloud foundations earlier, and is now converting that into scope expansion, not just cost optimisation,” Sidhant Rastogi, President, Zinnov, said.
Life sciences is another resilient pocket. During the company’s Q4 commentary, Infosys called out communications and life sciences as growing well above the company’s average.
The weak pocket, however, is manufacturing. HCLTech CEO and MD also flagged on the Q4 call that US telecom clients and SAP-related cancellations drove specific Q4 weakness, and that JPMorgan expects telco weakness and SAP cancellations to persist into FY27. Tariff uncertainty is the underlying macro driver. Rastogi said that clients in tariff-exposed sectors are deferring discretionary decisions until policy clarity emerges.
Tariff uncertainty
“Tariff uncertainty in US manufacturing is showing up in specific client programme ramp-downs. The Daimler programme at Infosys is the highest-profile example. Manufacturing is now a 100 to 150 basis point drag on cohort growth that did not exist eighteen months ago,” he said.
Alongside, he noted that geographically, Europe is showing clearer recovery than North America in this cycle, a reversal from FY22 to FY24. Capgemini called out Europe’s sovereignty-AI investments as a new demand pool. Tech Mahindra’s Q4 beat was also led by wins in European accounts. While Europe lagged the US on initial AI adoption, it is now running faster on sovereign AI, regulatory-driven modernisation, and ecosystem plays. North America remains the dominant base for every Indian tier-1, but the incremental growth pocket in FY27 will be Europe.
On the other hand, headwinds include macro geopolitical overhang. If the Middle East situation deteriorates, it will lead to headwind for Indian IT.
HCLTech CEO flagged “rising energy prices and supply chain disruptions” in Europe, and his broader framing that “the business environment remains highly fluid, making it difficult to form a definitive view of how the next 12 months will unfold” captures the tone across the tier-1 cohort. Rastogi noted that recession probability in the US remains elevated but not base case, and none of the Indian tier-1 CEOs have described it as their primary FY27 risk.
Sanchit Vir Gogia, Chief Analyst at Greyhound Research, explained that industries like financial services do not have the luxury of stepping back.
“Technology here is tied to compliance, risk, and day-to-day operations. Delaying investment is not an option. Healthcare and energy behave similarly. In each case, the systems being supported are critical and cannot be paused without consequence,” he noted.
Public sector programmes also continue, especially where they are linked to long-term national priorities. These initiatives are usually less influenced by short-term shifts. There is little appetite for experimentation without control. Solutions that offer predictability, governance, and reliability are preferred. Speed takes a back seat to stability.
Regionally, he said, North America continues to show a degree of steadiness. Europe feels more uneven, especially in areas exposed to economic pressure. The Middle East stands out for its momentum, often driven by sovereign investment strategies.
Published on April 29, 2026