Indian IT services companies are likely to face another challenging earnings season according to JP Morgan. As AI-led disruption, delayed deal conversions and cautious client spending weigh on growth, the brokerage lowered medium-term growth estimates across the sector
JP Morgan cut valuation multiples and downgraded HCL Tech, Wipro and Tata Technologies, “We do not expect large-caps to hit mid-single-digit growth and hover around 3-4% revenue growth. Our top Overweights remain Tata Consultancy Services, Infosys, Tech Mahindra, Coforge, Persistent and Sagility,” JP Morgan said.
JP Morgan on IT sector stocks
JP Morgan said the industry remains in the “deflation” phase of AI adoption, with the demand benefits still some time away. The brokerage now expects large-cap IT companies to deliver revenue growth of only 3-4% over the medium term and believes the usual first-half recovery is unlikely to materialise this year.
The brokerage also lowered its first-quarter revenue growth assumptions across coverage after channel checks pointed to delays in deal closures, slower project ramp-ups and continued client indecision amid geopolitical uncertainty and rapid AI-led changes. Following Accenture’s weaker guidance, JP Morgan expects Infosys, HCL Tech and Wipro to lower or soften their FY27 guidance.
JP Morgan on Infosys: ‘Overweight’
JP Morgan maintained its ‘Overweight’ rating on Infosys with a target price of Rs 1,200, implying an upside of about 17%.
The brokerage trimmed its FY27-FY29 earnings estimates by up to 2% after lowering revenue assumptions and reduced its target valuation multiple to 14.5x from 19x. Despite the cuts, JP Morgan continued to prefer Infosys because it expects the company to remain among the better-positioned large-cap IT services firms through the current slowdown.
JP Morgan also expects Infosys to reduce its FY27 constant-currency revenue growth guidance, excluding Optimum, to 1-2.5% from 1.5-3.5%. Including Optimum, it expects guidance to move to 2.5-4%.
JP Morgan on HCL Tech: ‘Underweight’
JP Morgan downgraded HCL Tech to ‘Underweight’ from ‘Neutral’ and lowered its target price to Rs 1,000, implying a downside of about 10%.
The brokerage expects HCL Tech to remain one of the faster-growing large IT companies but believes that growth will come with structurally lower margins. It said its FY27-FY28 earnings estimates remain 5-8% below Street expectations and that the stock has yet to fully reflect the downside risk despite its correction this year.
JP Morgan also expects HCL Tech to lower its FY27 services revenue growth guidance to 1-3.5% from 1.5-4.5%.
JP Morgan on Wipro: ‘Underweight’
JP Morgan downgraded Wipro to ‘Underweight’ from ‘Neutral’ and lowered its ADR target price to $1.70 from $2.20, implying downside from current levels.
The brokerage cut its earnings estimates by 1-5%, reflecting weaker revenue expectations, and reduced its target valuation multiple to 12x from 15x. JP Morgan expects Wipro to continue lagging peers on growth as demand remains weak.
JP Morgan also expects Wipro to guide for sequential revenue growth of between -2% and 0% for the second quarter of FY27.
JP Morgan on Coforge: ‘Overweight’
JP Morgan maintained its ‘Overweight’ rating on Coforge with a target price of Rs 1,800, implying an upside of about 22%.
The brokerage made only marginal changes to earnings estimates after slightly lowering revenue assumptions. It also reduced the target valuation multiple to 24x from 25x while retaining Coforge among its preferred ideas because of its relatively stronger growth outlook.
JP Morgan on Mphasis: ‘Overweight’
JP Morgan maintained its ‘Overweight’ rating on Mphasis with a target price of Rs 2,600, implying an upside of about 16%.
The brokerage made only minor reductions to earnings estimates and lowered its target valuation multiple to 18.5x from 20x. It said the changes reflect a more gradual recovery in medium-term growth rather than company-specific weakness.
Conclusion
JP Morgan expects AI-led productivity gains to remain a near-term headwind for traditional IT services spending before eventually supporting a new investment cycle. Until then, the brokerage expects technology disruption, tighter client budgets and slower deal conversions to keep pressure on revenue growth across the sector.
JP Morgan continues to prefer companies with stronger execution and relatively resilient growth profiles while remaining cautious on businesses where, in its view, earnings expectations remain too optimistic.
Disclaimer: The institutional equity research ratings, target prices, and earnings projections outlined in this summary of JP Morgan’s Indian IT services report are for informational and educational purposes only. They do not constitute financial advice, an offer, or a solicitation to buy, sell, or hold equity shares. Investments in the information technology sector are subject to significant cyclicality, corporate discretionary spending volatility, global macroeconomic shifts, client-side automation trends, and rapid advancements in artificial intelligence that can fundamentally alter traditional billable-hour software service models. Readers are strongly advised to perform independent due diligence and consult a SEBI-registered investment advisor or certified financial professional before making financial choices or investing capital based on these targets.
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