The Great Indian IT Slowdown: What Actually Happened to TCS, Infosys and Wipro

For nearly two decades, the Indian IT services industry was the country's most reliable growth story. Every quarter, TCS, Infosys and Wipro would post double-digit revenue growth, hire tens of thousands of engineers, and hand out fat bonuses. The stocks were the anchor of nearly every mutual fund portfolio. Parents in tier-2 towns pushed their children into engineering colleges with one dream in mind: a job at an IT major and, eventually, a US onsite posting.

Then, somewhere between 2023 and 2025, the story cracked. Growth slowed to low single digits. Hiring froze. Freshers who had been given offer letters waited eighteen months for a joining date. Attrition, which had been the industry's biggest headache in 2022, suddenly reversed — people were desperate to hold on to their jobs.

If you own IT stocks or are thinking of buying them, it's worth stepping back and asking honestly: what actually happened?

The setup — why FY22 was the peak

To understand the slowdown, you have to remember how good things were in FY22.

Covid had accelerated corporate digitisation by roughly five years in eighteen months. Every bank, insurer and retailer in the world suddenly needed to move to the cloud, rebuild their customer apps, and modernise their back-end systems. There weren't enough engineers on the planet to do it. Indian IT majors were the natural beneficiaries.

TCS added 100,000 employees in a single financial year. Infosys grew revenue at 19% in constant currency. Wipro made 12 acquisitions in eighteen months. Salaries for two-year experienced developers doubled. LinkedIn was full of people jumping jobs every six months for 40% hikes.

Nobody paused to ask what would happen when the deal pipeline emptied.

The turn — how the demand vanished

The first cracks appeared in the winter of 2022. US regional banks, which had been big buyers of digital transformation projects, started pulling back after interest rates jumped from near-zero to 5%. Then in March 2023, Silicon Valley Bank collapsed. Suddenly, discretionary tech spending across the American banking industry — the single biggest customer of Indian IT — was frozen.

Retail followed. Then telecom. Then insurance. By early 2024, most Fortune 500 CIOs were being told the same thing by their boards: cut IT spend, delay transformation projects, do more with less.

For Indian IT companies, this hit two places at once. New deal signings slowed. And, more painfully, existing clients started renegotiating rate cards, asking for productivity discounts and pushing more work offshore to squeeze margins.

TCS's constant-currency growth, which had touched 15.4% in FY22, fell to 3.4% in FY24. Infosys guided for 1-3% growth in FY25. Wipro's revenue actually shrank. LTIMindtree, the newly merged giant, missed almost every quarterly estimate through 2024. Mid-caps like Persistent and Coforge held up better, but even they saw growth halve from their peaks.

The generative-AI question nobody wants to answer honestly

The industry's official line — repeated in every earnings call — is that generative AI is a "net positive" for Indian IT. Clients need help implementing it. Companies like TCS have thousands of "AI-ready" engineers. Deal pipelines are strong. Everything is fine.

The honest answer is more complicated.

Code generation tools like GitHub Copilot, Cursor and Claude Code are already making individual developers 30-40% more productive on routine tasks. Application maintenance work — which historically employed lakhs of Indian engineers in pyramid-shaped delivery teams — is the most exposed. Clients are quietly asking why they need to pay for the same number of "L1 support engineers" when a smaller team with AI tools can do the job.

Nobody at TCS or Infosys will say this on an earnings call, because it would tank the stock. But it is showing up in the numbers. Hiring at the top five IT firms fell from around 2.5 lakh in FY22 to fewer than 30,000 in FY24, and stayed muted through FY25. Campus placements at second-tier engineering colleges have collapsed. Salary hikes have been the lowest in a decade.

This does not mean Indian IT is finished. It does mean the pyramid model — hire lots of freshers, train them, bill them at low rates, expand margins as they climb — is under real pressure for the first time since 1995.

What the numbers say now

As of the September 2025 quarter results:

• TCS revenue grew about 5.9% year on year in constant currency, with operating margins holding near 25%. Attrition had fallen to 12%, the lowest since 2016.
• Infosys revised its FY26 guidance upward to 3.5%-5.5%, better than feared. Large deal wins remained strong.
• HCLTech continued to be the outperformer, helped by its software-products business.
• Wipro remained the laggard, still shrinking on a year-on-year basis.
• Mid-caps like Persistent and Coforge posted 12-15% growth, benefiting from a narrower client base and quicker decision-making.

Stock prices reflected this split. TCS traded flat between April 2024 and September 2025 — a two-year time correction that is unusual for an Indian large-cap. Infosys and Wipro underperformed the Nifty 50. Mid-cap IT names, on the other hand, hit fresh all-time highs multiple times.

Why this matters for retail investors

If you have been investing in mutual funds through SIPs in India, you almost certainly have significant exposure to IT services. It is one of the top three sector weights in nearly every diversified equity fund. That was fine when the sector was compounding at 15% annually. It is a different conversation now.

Three practical takeaways.

The sector is not a monolith anymore. Large-cap and mid-cap IT are moving in opposite directions. The old habit of "IT is defensive, buy on dips" needs to be re-examined stock by stock.

Margins are structurally under pressure. Even if revenue growth returns to double digits, the wage inflation that hit the sector in 2021-22 has not fully rolled back. And AI-driven productivity gains, when they finally hit the P&L, will as likely accrue to the client as to the vendor.

The valuation premium is compressing. TCS used to trade at 30-35x forward earnings. It now trades closer to 25x. That re-rating alone has cost investors a chunk of returns, even before any earnings disappointment.

What to watch in FY27

Three signals will tell you whether the slowdown is ending or deepening.

The first is US banking discretionary spend. BFSI is roughly 30% of Indian IT revenue. When banks start greenlighting new digital projects again, the top-line will follow within two quarters.

The second is fresher hiring. When TCS and Infosys start giving out 40,000-plus offers a year again, it will mean management sees a two-year growth cycle ahead. Until then, the flat headcount tells its own story.

The third is deal-tenure mix. AI-related deals today tend to be smaller and shorter (six to twelve months) compared with the old five-year transformation contracts. Watch whether the "total contract value" numbers reported each quarter are being padded with these short deals, or whether the long ones are coming back.

The bigger picture

The Indian IT story is not over. The country still produces the largest annual pool of English-speaking software engineers in the world. Global companies still need somewhere to run their tech operations, and India is by far the most cost-effective option. Even in a bad year, TCS generates over ₹40,000 crore of free cash flow and pays it back as dividends and buybacks.

But the era of easy 15% growth may genuinely be behind us. For the first time in a generation, Indian IT looks like a mature industry rather than a hyper-growth one. That is not a disaster. It is just a different investment case — one that demands more homework and, probably, more patience.

This is an educational article. It is not investment advice. Please consult a SEBI-registered advisor before making decisions.