The Rupee Illusion: Why Big IT Sales Growth Isn’t What It Seems

Is the AI pivot helping the Indian IT giants make a comeback? Looking at strong Q2 numbers, it might seem so. The surge, however, is the byproduct of the Indian rupee weakening against the US dollar. 

To put things into perspective, IT giants (refer to the table below) earn mostly in US dollars. With the rupee falling about 8.4% against the dollar over the past year, Indian IT giants have reported a growth in the vicinity of 10%. 

Remove that rupee factor, and we get a much more realistic picture. In constant currency terms, none of the four grew more than 2.4% over the previous quarter (sequential), and in terms of year-on-year, it stayed flat with Tech Mahindra being an exception. Read on for more details.

Profits are up too, but this comes on the back of cost cutting, improved margins, and the weakened rupee, as mentioned above. 

In a nutshell, results are strong but demand is not.

Company	YoY Revenue Growth (INR)	Constant Currency (CC) Growth (YoY)
TCS	11.2%	2.8%
HCLTech	11.5%	2.6%
Tech Mahindra	15.6%	7.2%
Wipro	9.1% (total )	0.6% (IT services)

The saturated trajectory is not unsurprising. Brokerages had warned that clients were spending carefully and that AI was pushing down the prices IT companies can charge. 

Jefferies had said the large companies could post their weakest July–September growth in three years. It estimated sector growth of just 1.7% in constant currency, of which only 0.8% would come from the companies’ own business.

Large Companies: Overview

TCS

TCS, the biggest IT company in India, had a flat growth this quarter with net profit of Rs 13,884 crore.

TCS has broadened its growth across the portfolio. 

K Krithivasan, Chief Executive Officer and Managing Director, said at the earnings conference, “BFSI was our strongest large vertical and the largest contributor to growth, with 2.5% sequential and 3.9% year-on-year growth in constant currency.” 

The Manufacturing and Technology and Services verticals each grew 3.1%. Meanwhile, Consumer Business and Energy, Resources and Utilities showed an improvement compared to the previous quarter.

The CEO mentioned AI-led deals as a structural growth opportunity for the companies. With the evolving demand of clients, the company added 4,258 employees, taking its total to 598,056. 

HCLTech

HCLTech earned net profit of Rs. 5,132 crore, up 21.2% from Rs.4,235 crore a year earlier. The revenue also rose 11.5% YoY, and Advance AI revenue also grew 28.4% QoQ. The increment of revenue specifically in Advance AI gives the company a new opportunity to grow. 

On this, C Vijakumar, CEO and MD, said, “Our AI propositions are resonating well with our clients, giving us confidence in our growth trajectory.” 

The company signed new contracts worth $3.26 billion, up 27% from a year ago, and the first six months of the year set a record. Meanwhile, the company narrowed its forecast for the year: it now expects real growth of 2.5% to 4%, instead of 1% to 4%.

Tech Mahindra

Tech Mahindra had good profit margin growth among the large companies. Net profit rose 32.7% to Rs.1,586 crore, and operating profit rose 40.5% to Rs.2,387 crore. Its operating profit margin reached 14.8%, against 12.1% a year ago, the twelfth straight quarter of improvement. It won new contracts worth more than $1 billion for the fourth quarter running, which CEO Mohit Joshi said reflects “the strength of our customer relationships and the trust we have built.” The company will pay a dividend, a payment to shareholders, of Rs.15 per share. It has also recommended a bonus issue, which gives shareholders one free share for every share they hold. It would be the company’s first since 2015, and shareholders still have to approve it.

Wipro 

Wipro’s profit fell 1.9% from a year earlier and 4.7% from the previous quarter, to about Rs. 3,200 crore. Its IT services sales did not grow in real terms, though its operating profit share improved by 0.5 points to 16.5%. The value of large new contracts fell 58.6% to $674 million. 

In the earnings call, Srini Palli, CEO and MD, said, “We will scale engineering and technology operations to support Energy, Manufacturing, and Resources sector modernization, cloud-native platforms, and AI capabilities for our clients. And strengthen the global delivery model.” 

Management also mentioned two awarded deals were not signed before the quarter ended because of paperwork. For October to December, Wipro expects sales to change by between -1.5% and +0.5%, because many clients pause work over the year-end holidays and there are fewer working days.

Smaller Firms Grow Faster :

Kotak said in a recent note that smaller IT firms would again do better than the giants, as they keep winning business from them. JM Financial says investors value these firms about 75% higher than the large ones, so expectations for them are high.

Persistent Systems grew revenue in dollars by 20% to $487.6 million, its 26th quarter of growth in a row. But its reported profit fell 25.4% to Rs.352 crore, because it spent Rs.185 crore on costs linked to buying the German company Nagarro. Without these costs, profit rose 5% to Rs.495 crore. 

“The company made substantial progress towards the Nagarro acquisition, securing approximately 94.04% of its share capital and voting rights, excluding treasury shares,” said Sandeep Kalra, CEO and Executive Director. 

The proposed combination aligns with our long-term M&A strategy to strengthen our engineering capabilities, diversify our geographic presence and expand our global delivery capabilities.  This agreement helps the company to focus on AI-led digital engineering.

Tata Elxsi’s revenue grew 15% to Rs.1,056 crore, but real growth was 7.8%. Its operating profit share improved to 19.7%, while profit was flat compared with the previous quarter, at Rs. 170 crore. The company reported good traction in various verticals. 

Manoj Raghavan, CEO and MD, at the earnings call said, “The transportation vertical reported a quarter-on-quarter growth of 2% in constant currency terms, aided by new deal wins. A notable win is a strategic multi-year deal from a leading Tata Elxsi Limited October 13, 2026 Page 3 of 16 automotive OEM for a next-generation, cloud-based telematics and connected vehicle ecosystem.” 

For the next quarter, the company will focus around innovation, digital engineering, AI adoption, and product modernization.

Tata Technologies grew sales 28.4% to Rs.1,699 crore, but profit rose only 3.6% from a year ago and fell about 5% from the previous quarter, to Rs.171 crore. It won a $138 million contract to develop a full vehicle for a European luxury carmaker, and it expects strong double-digit growth this financial year, which runs to March 2027.

 AI: A fast-growing business

As mentioned above TCS said its AI business is now running at $3.1 billion a year, up from $1.5 billion a year ago and it is more than 10% of TCS’s sales for the first time. HCLTech’s advanced AI business earned $219 million in the quarter, about 6% of its sales and 78% more than a year ago in real terms.

But AI also lets companies do the same work faster, so clients expect to pay less. Kotak estimates this will cut the price of existing work by about 7% before any new AI-related business is counted, and by about 3.5% after it. That explains how TCS can report fast-growing AI income while its overall real growth is only 0.5%. The next two quarters will show whether new AI income can grow faster than prices fall.

What small investors are doing

Small investors are buying IT shares, but carefully, said Sarvam Goel, co-founder of the stockbroking platform Pocketful. “After the deep correction earlier this year, the TCS and HCLTech numbers gave them the comfort they were waiting for,” he said. Many are buying in parts and holding back some money until Infosys reports on 23 October. “Much of the recent rally is a relief bounce, so the mood is constructive but not euphoric,” he said. A relief bounce is a short recovery after a big fall.

Goel called the sector “increasingly a value opportunity after a sharp de-rating; this is a transition, not a decline.” He said large IT firms remain the core holding, while smaller IT firms are “the momentum play, though their richer valuations leave less room for error”.

What to watch next

L&T Technology Services reports on 19 October and Cyient on 22 October. Infosys and Coforge report on 23 October. Kotak expects Infosys to lower its forecast for the year to growth of 1.5% to 2.5%, and Citi expects 1% to 2%. October to December is usually a weaker quarter, because clients cut project work over the holidays, and Wipro has already forecast flat or falling sales. What the companies say about the second half of the year will show whether one weak quarter becomes a weak year.

 *ENDS*