Webull beats Q3 expectations as revenue jumps 55% on strong trading
Investing.com -- The IT sector continues to face growth challenges, with aggregate revenue growth remaining subdued at just 1% year-over-year in September 2025.
While demand hasn’t deteriorated further, it isn’t improving rapidly enough to match consensus expectations of 7% US$ revenue growth in FY27. Jefferies analysts maintain a selective approach to IT stocks, given valuation concerns.
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The Nifty IT index currently trades at a 33% PE premium to Accenture, compared to an average 12% discount over the past decade. This premium pricing, combined with tepid growth forecasts, suggests potential derating risks ahead.
Despite seasonal pickup in growth to 1.5% quarter-over-quarter after two declining quarters, the overall outlook remains cautious. The improvement was primarily driven by Life Sciences and Other verticals, while Retail/CPG continued to drag. Mid-sized IT firms consistently outperformed larger competitors, though forex tailwinds and wage deferrals helped support margins across the sector.
Jefferies’ top IT stock picks include:
Infosys - Preferred among large IT firms, Infosys showed stronger growth compared to most peers in the latest quarter. However, the company lagged on margins and has yet to decide on the timing of wage hikes. Like other IT majors, Infosys refrained from raising the upper end of its FY26 revenue guidance, suggesting limited improvement in the demand outlook.
In recent developments, Infosys announced the details for an upcoming equity share buyback program. Separately, JPMorgan reiterated an Overweight rating on the company, highlighting its strong cash position.
HCL Technologies Also favored among large-cap IT stocks, HCL Tech positively surprised on revenue growth. The company maintained its FY26 guidance without increasing the top end, indicating cautious optimism rather than expectations for significant demand acceleration. Analysts note that despite strong revenue performance, management commentary doesn’t suggest material improvement in overall demand conditions.
Jefferies also expressed preference for mid-sized IT firms, specifically naming Coforge and Sagility as top picks, though detailed analysis of these companies wasn’t provided in the report. The analysts noted that most mid-cap IT names witnessed upward revisions to consensus earnings estimates, which has supported the Nifty IT’s 2% outperformance versus Nifty50 since October.
As IT companies acknowledge AI-led productivity benefits being passed on to clients, deal bookings remain healthy (up 26% year-over-year) but continue to focus on vendor consolidation and cost reduction programs rather than growth initiatives.
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