Mid and small-cap IT services firms continued to outshine their larger counterparts in the fourth quarter and full financial year of FY25, a trend analysts believe is set to continue through FY26. The shift marks a significant departure from historical norms where tech giants such as Tata Consultancy Services (TCS), Infosys, and HCL Technologies typically led the growth charts.
In FY25, firms like Coforge, Persistent Systems, Hexaware Technologies, and Mphasis posted impressive revenue growth ranging from 7% to 32%. By contrast, TCS, Infosys, and HCLTech reported modest growth of around 4%, while Wipro’s revenue contracted by 2%. This divergence in performance was even more apparent in the January–March quarter, where Coforge’s sequential revenue rose 4.7% to Rs 3,410 crore, and L&T Technology Services registered a 12.4% increase to Rs 2,982.4 crore. Meanwhile, the larger firms posted mixed results, missing revenue expectations despite winning substantial deals.
Analysts attribute the out-performance of smaller IT companies to several factors, including superior execution, quicker adaptation to emerging technologies such as generative AI, and more stable leadership. Kotak Institutional Equities noted that the disruptive nature of GenAI offers greater opportunities to agile challengers while acting as a headwind for incumbents. Larger firms, due to their size, face greater challenges in restructuring service portfolios to accommodate newer, often deflationary, technologies. Mid-tier companies, on the other hand, can afford short-term revenue trade-offs to gain long-term strategic advantages.
Leadership stability has also played a crucial role. CEOs at many mid-sized firms have held their roles for over five years, providing consistency in vision and execution. In contrast, several industry giants are navigating through leadership changes. TCS appointed K Krithivasan in June 2023, Tech Mahindra brought in Mohit Joshi in December 2023, and Wipro named Srinivas Pallia as its new CEO in April 2024.
Coforge, one of the standout performers, is expected to continue leading into FY26. Kotak Institutional Equities forecasts 20.8% organic constant currency revenue growth for the company, up from 16.4% in FY25. The company’s CEO Sudhir Singh expressed strong confidence in sustained growth, citing robust order inflows and increasing deal sizes. Coforge reported $2.1 billion in new orders in Q4 FY25, including five large contracts across key global markets. Notably, it became the only Indian IT firm to sign a mega deal in FY25, a $1.56 billion, 13-year contract with US-based Sabre.
In contrast, large-cap firms enter FY26 on a more subdued note. Despite healthy deal pipelines, concerns over macroeconomic conditions, including tariff uncertainties in the US and weak discretionary spending, have led to cautious revenue forecasts. Executives from TCS, Infosys, Wipro, and HCLTech echoed a wait-and-watch stance as clients continue to delay decision-making.
Hiring trends also mirrored this divergence in sentiment. Infosys, TCS, and Wipro reversed previous quarters’ reductions by adding headcount in Q4 FY25. HCLTech saw an annual headcount dip due to a divestiture, though it added over 2,600 employees in the final quarter. Meanwhile, mid-sized firms plan to continue hiring fresh graduates while leaning further into automation for efficiency gains.