Largecap Indian IT services companies such as Tata Consultancy Services (TCS), Infosys and HCL Technologies are expected to benefit from robust third-quarter earnings reported by major US banks, which continue to prioritise their technology spending despite macroeconomic uncertainties, analysts said.
The banking, financial services, and insurance (BFSI) vertical accounts for a significant portion of revenues for large Indian IT companies. With US banks reporting strong operating performance and maintaining steady investments in digital and AI-driven transformation, the outlook for Indian IT providers remains optimistic.
US Banks Report Strong Q3 Earnings
Leading US financial institutions — including JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, and Wells Fargo — reported better-than-expected Q3 earnings, supported by resilient market activity, loan demand, and cost controls.
According to Antique Stock Broking, JPMorgan reported 8.8% year-on-year (YoY) growth driven by markets and fee income, while Bank of America rose 10.8% on broad-based momentum. Citigroup’s earnings increased 9.3% on strong banking and market revenue.
Goldman Sachs and Morgan Stanley surged 19.6% and 18.5%, respectively, supported by an investment banking and advisory rebound, while Wells Fargo grew 5.3% on improved lending and net interest income.
Technology Spending Remains a Priority
US banks continue to raise their technology investments, focusing on AI, automation, digital engagement, and infrastructure modernization. JPMorgan and Wells Fargo reported YoY tech spending growth of 16.0% and 15.5%, respectively, followed by Goldman Sachs (9.4%) and Morgan Stanley (7.4%). Citigroup and Bank of America saw modest increases of around 2.3–2.4%.
Average tech spending among these banks remained steady at around 6.6% of sales in Q3CY25, underlining continued commitment to technology-led transformation.
Indian IT Firms See BFSI Growth Momentum
The BFSI vertical for large Indian IT companies grew 4% YoY in constant currency terms during the latest quarter, led by HCL Technologies, which reported 11.4% growth driven by renewals and AI-led transformation programs.
TCS saw 1% growth and expects steady recovery as discretionary spending stabilizes and previously paused projects resume. Infosys continued to see momentum in mortgages, capital markets, and commercial banking, aided by interest rate cuts and AI-driven modernization. Wipro reported a 4% decline YoY but recorded sequential recovery with strong deal activity.
Analysts expect BFSI to remain a key growth driver for Indian IT firms, supported by large deal wins and ongoing digital investments from US financial institutions.
IT Sector Outlook
“US banks’ resilient Q3CY25 results highlight that technology budgets—particularly for digital transformation, cybersecurity, and AI—remain stable despite global headwinds. This is encouraging for Indian IT firms, nearly a third of whose revenues come from US financial institutions,” said Naren Agarwal, CEO, Wealth1 – PMS & AIF Investments.
According to him, with clients prioritizing cost efficiency and automation, large Indian players with deep BFSI exposure are well positioned to benefit. Mid-tier firms focusing on AI-driven analytics and cloud modernization could also see renewed traction.
“However, investors should note that India’s IT industry remains largely service-oriented, with limited product-led innovation — making long-term differentiation a challenge. Still, with improving deal visibility and easing macro conditions, the sector stands well placed to capture the next phase of global digital transformation,” said Agarwal.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited also stated that since BFSI segment constitutes the largest chunk of the Indian IT firms’ market, resilient Q3 earnings of US banks suggest better prospects for Indian IT firms.
“The large players will benefit out of this. Even then the IT segment is unlikely to deliver more than 5% top line growth in FY26. Mid-caps like Persistent Systems and Coforge have potential to deliver industry-beating returns,” said Vijayakumar.
Market expert Avinash Gorakshakar explained that most US banks outsource their work to Indian IT vendors especially as they are not only cost effective but highly skilled in terms of quality and delivery timelines.
“This is especially true in projects which are long term in nature. Also in new areas like AI machine learning, Indian companies are most competitive as compared to global peers. US is the largest market for Indian IT vendors with sectors like BSFI, insurance, Aerospace, Media, Healthcare and Railways where Indian companies have outshined their global peers, both on costs and quality,” said Gorakshakar.
He said that large-cap IT stocks such as Infosys, TCS, and HCL Technologies are likely to be key beneficiaries of continued tech spending by US banks.
Meanwhile, HCL Technologies, Mphasis, and Coforge are Emkay Global’s preferred picks within the IT coverage universe.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
