The combined market cap of the big four tech companies as percentage of total Nifty market cap has come down from around 18 per cent at end-FY23 to around 12 per cent now
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xavierarnau
The Q3 FY26 results reported by the big four IT services companies — TCS, Infosys, HCL Technologies (HCL) and Wipro — arguably point to the prolonged sector slowdown nearing its end. Although the constant currency revenue growth numbers are quite weak (barring HCL), the results are better than expectations. Management commentary has inched up in positive tone; but it has been a tad vaunting on AI capabilities without any acknowledgment of the grim slowdown that has played out over three years.
For Q3, the Y-o-Y constant currency revenue growth stands at -2.6 per cent, 1.7 per cent, 4.8 per cent and -1.2 per cent for TCS, Infosys, HCL and Wipro respectively. TCS results are impacted by a higher base effect from the large BSNL deal that boosted Q3FY25 results. Adjusted for this, its CC revenue growth would have likely been in the 1-2 per cent range. Operating margins and bottom-line were broadly saved by currency depreciation and cost controls. The downtrend may be bottoming out, but stakeholders must not take things for granted. Global macros still face challenges from a K shaped economic growth, relatively high inflation, the most challenging phase in geopolitics in the post-Cold War era and continued tariff related uncertainty. All these can weigh on client decision-making. Stakeholders — investors, employees and society — must continue to adjust to the new normal and managements need to focus on investments over free cash flows.
On the investment side, managements are perhaps finally waking up to the new reality. This is evident with the recent $700 million acquisition by TCS of Coastal Cloud. The larger companies here need to take the cue from the midcap IT players like Coforge which recently made one of the largest deals in the history of the Indian IT services industry by announcing acquisition of Encora for $2.35 billion. The slowdown has been partially due to underinvestment in prior years and competency gaps to tap opportunities in the AI space.
From an investor perspective, it is worth noting that the combined market cap of the big four tech companies as percentage of total Nifty market cap has come down from around 18 per cent at end-FY23 to around 12 per cent now. The role of these companies in wealth creation has waned. They are no longer steady state growth companies; the era of heady valuations is over. Based on employee statistics for the big four companies for the nine-month period, net head count addition is down by around 700-750. While it has modestly increased for Infosys, HCL and Wipro, reductions at TCS have nullified the gains. This is the third year of weak headcount trends. The top five out of the top 10 players in the industry (Big four plus Tech Mahindra) account for 85-90 per cent of industry revenue; their head count trends have an overbearing impact on job creation. For perspective, in FY23 these four players added around 82,500 jobs. So the ecosystem needs to adjust to slower job addition and more demanding skill sets.
Published on January 20, 2026
