The Indian IT sector has posted its strongest recovery in Q3 FY25, marking a significant turnaround after a period of sluggish growth. With improving revenue figures, strong deal wins, and signs of discretionary spending revival, the latest quarter signals renewed optimism for the industry. But is the recovery sustainable? Let’s break down the numbers.
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The strongest recovery in 18 months
The third quarter of FY25 (October-December 2024) turned out to be a major milestone for Indian IT firms. Experts noted that this was the healthiest recovery in the past 18 months, with constant currency revenue and deal wins showing strong improvement across most companies. This positive shift comes despite the seasonal impact of furloughs and global macroeconomic uncertainties.
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Key highlights from Q3 FY25:
| Metric | Q3 FY25 Performance |
| Infosys Revenue Growth (QoQ, Constant Currency) | 1.7% (Beating 0.8% estimate) |
| TCS Total Contract Value (TCV) | $10.2 billion (Up from $8.6 billion in Q2) |
| Infosys Large Deal TCV | $2.5 billion (Q2: $2.4 billion) |
| HCLTech Deal Wins | $2.1 billion (Q2: $2.2 billion) |
| Wipro Deal Wins | $3.51 billion (Large deals: ~$1 billion) |
Despite previous concerns about the impact of H1-B visa policy uncertainty, IT companies managed to overcome headwinds and posted stable growth. With the US elections no longer causing business paralysis, many enterprises have resumed their technology investments in AI, data infrastructure, and cybersecurity.
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A mixed bag: How did IT majors perform?
While the industry as a whole saw a recovery, performance varied among the top firms. Infosys and Wipro led the way, exceeding analyst expectations, while TCS and HCLTech faced some seasonal setbacks.
- Infosys outperformed estimates with a 1.7% sequential revenue growth in constant currency terms, driven by strong demand in financial services and improved spending in Europe. CEO Salil Parekh highlighted the revival in discretionary spending in the BFSI sector across both the US and Europe.
- Wipro saw a minor revenue uptick, surpassing expectations due to a strong pipeline of deals in the BFSI sector and the Americas. CEO Srini Pallia noted that clients were showing cautious optimism, leading to a slow but steady return of discretionary IT spending.
- TCS reported a strong TCV of $10.2 billion, but revenue and profit figures missed estimates due to seasonal Q3 challenges. CEO K Krithivasan pointed out that while deal wins were robust, conversion into revenue remained a challenge.
- HCLTech saw sequential growth in revenue and operating margins but failed to meet analysts’ expectations. The company observed a shift towards shorter-duration deals, impacting total deal value.
IT sector outlook for FY26
| Company | Revised FY25 Growth Projection |
| Infosys | 4.5% – 5.0% (Up from 3.75% – 4.5%) |
| HCLTech | 4.5% – 5.0% (Narrowed from 3.5% – 5.0%) |
| Wipro | (-1%) to 1% |
Hiring trends: cautious optimism in the job market
The hiring outlook in the IT sector remained mixed in Q3 FY25. While some companies continued expanding their workforce, others reduced headcount, reflecting a seasonally weak period for recruitment.
- Infosys added 5,000+ employees in Q3 and plans to hire over 20,000 freshers in FY26.
- HCLTech expanded its workforce by 2,134 employees, showing steady hiring momentum.
- TCS saw a decline of 5,370 employees, despite a long-term hiring outlook of 40,000 new hires in FY25.
- Wipro’s headcount shrank by 1,157 employees, but the company emphasized improving retention and aligning hiring plans with demand.
- Tech Mahindra reduced its workforce by 3,785 employees, citing business restructuring as the primary reason.
Attrition rates remained elevated but within manageable levels across the industry. As the demand environment improves, hiring is expected to pick up in FY26.
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The role of generative AI in IT sector growth
Generative AI (GenAI) has emerged as a key driver for the IT sector, influencing both revenue growth and cost efficiencies. All major IT firms reported increased investments in AI-led transformations:
- HCLTech highlighted an 85% cost reduction in large language models through GenAI adoption.
- TCS and Infosys maintained strong AI traction in the BFSI sector, leveraging automation to improve service offerings.
- Wipro and HCLTech observed steady demand for AI-led transformations, despite concerns over shorter deal tenures.
What lies ahead for the IT industry?
As IT firms enter Q4 and beyond, the industry outlook remains cautiously optimistic. With discretionary spending showing signs of a steady comeback, IT majors are positioning themselves for sustained growth.
Key factors to watch in FY26:
- Conversion of large deal wins into actual revenue growth
- Sustained demand in BFSI, retail, and healthcare sectors
- Expansion of AI-led transformation initiatives
- Hiring trends and attrition rate management
- Macroeconomic stability in the US and Europe
While risks such as shorter deal cycles and challenges in emerging markets persist, the Indian IT sector appears to have turned a corner. If the recovery momentum continues, FY26 could see a strong revival for the industry.
