Q2 preview: Coforge set to lead IT earnings as mid-tier firms outshine largecaps; 8 stocks to buy - News Air Insight

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Mid-tier IT services companies are expected to shoulder the growth momentum for the sector in Q2FY26 — a quarter marked by macroeconomic headwinds and pricing pressures that dampened overall industry revenues, as clients stayed cautious on large or discretionary spending. According to estimates by two leading domestic brokerages, these firms are likely to post constant currency (cc) sequential revenue growth in the range of -0.5% to 6%.

Coforge, a tier-2 IT company, is likely to trump its tech peers with a 6% quarter-on-quarter cc growth in the September quarter, Nuvama Institutional Equities said in a note, pegging the topline growth in a broad -0.5% to 6% range for the entire sector.

The last many quarters’ trend of tier-2 companies outpacing tier-1 will likely sustain, and tier-2 firms could post solid QoQ and YoY growth, this brokerage said.

Motilal Oswal Financial Services (MOFSL) also pegs the highest revenue growth for Coforge at 6% even as it sees the sector reporting a muted Q2, citing no material improvement over the past quarter.

Q2 revenue estimates snapshot

After Coforge, Nuvama’s next best estimate is on Persistent Systems at 3.7% followed by Hexaware (3.2%), LTIM (1.9%) and Mphasis (1.3% CC QoQ). In the Engineering, Research & Development (ERD) services segment, a modest growth is seen by the likes of L&T Technology Services (LTTS, +1.5%) and Cyient (+0.3%), largely due to the setbacks in the auto vertical.

For tier-1 companies, Infosys, HCL Technologies, and Tech Mahindra are the best case scenarios likely reporting growth of 1.8%, 1.5% and 0.9%. Tata Consultancy Services (TCS) and Wipro are likely to languish at 0.2% and 0.1% marginal cc increase.In smallcaps, Firstsource is likely to report 2.2% CC QoQ growth while Birlasoft (-0.5%) and Zensar (-0.1%) will be laggards, reporting QoQ dips.While largecaps viz. TCS, Infosys, HCL Technologies, Wipro and Tech Mahindra could report a topline growth of 0.3% to 2.4%, the tier-2 firms are seen to post revenue uptick of -0.5 to 6%, MOFSL said.

MOFSL’s biggest laggard is Zensar, which could report a 0.5% cc decline. In the midcap space, Persistent’s 3.5% likely uptick puts it in the second spot behind Coforge.

Here’s a detailed list of tech companies under MOFSL and Nuvama’s coverage and what investor should expect on the topline front:

Q2 PAT estimates

Motilal pegs adjusted aggregate profit after tax (PAT) growth for tier-1 companies at 1.8% with Tech Mahindra and HCL reporting a double-digit sequential growth up to 16%. TCS and Infosys may report a sequential net profit decline of 2.1% and 5.1%, respectively. Infosys may report a 3.5% growth, the estimates revealed.

On a year-on-year basis, a 5% aggregate increase is seen, with Wipro as the only company to report a PAT decline of nearly 2%. Infosys could lead the way with a 10% YoY jump, MOFSL estimates revealed.

Meanwhile, aggregate adjusted PAT for mid-tier companies in Q2 is expected to grow 25% QoQ and 13% YoY. The biggest contributors to the sequential growth will be all Mphasis (4.2%), LTTS (3.2%) and Persistent (3.2%) while Coforge (63.5%), Persistent (38%) and Hexaware (27%) will be top contributors in terms of YoY growth.

Tech Mahindra is seen to top the charts with over 17% QoQ PAT growth among tier-1 companies, followed by HCL Tech at 11%. On a YoY basis, Infosys and TCS trump their largecap peers with 11% and 10% growth, respectively, Nuvama noted.

Deals, margins and outlook

MOFSL expects margins to remain range-bound and supply-side pressures to stay muted, though meaningful margin gains could be limited given headwinds on multiple fronts, including pricing, change in delivery models, client behaviour, and the GenAI transition.

“FY26 is unlikely to see significant acceleration versus FY25, in our view. Further, FY27 acceleration will depend on the trajectory of deal wins in the next 2-3 quarters, posing a risk to street estimates,” MOFSL said.

BFSI is expected to remain resilient through FY26 even as auto OEMs adjust to tariff risks and spending remains elusive. Retail faces margin pressures and H1B constraints while healthcare continues to deal with US policy uncertainty.

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Nuvama’s reading on the deal front remains optimistic despite a volatile demand environment amid cost-takeout deals making up the bulk of incremental wins.

This brokerage also expects margins to likely stay stable or improve for most companies, with the wage hike delayed for most tech firms. “Given stable (not deteriorating) macros, we anticipate Infosys to maintain revenue growth guidance of 1–3% and HCLT to retain 3–5% revenue growth guidance. Margin guidance is also likely to be maintained by all companies,” it said.