Nomura sees marginal growth pickup in Indian IT in FY27; mid-caps to outpace large caps

CNBC TV18

The Indian information technology (IT) sector could see a marginal improvement in revenue growth in 2026-27 (FY27), with mid-caps likely continuing to outpace their large-cap peers, according to Abhishek Bhandari, Executive Director of Technology and Internet at Nomura.

Bhandari is now more positive on the sector than last year, citing early signs of artificial intelligence (AI) related spending and favourable currency movements.

Nomura's recent report projects that revenue growth for large-cap IT companies could improve to 4.5% in the next financial year, up from the current 3%. A key factor influencing profitability is the Indian rupee's exchange rate against the US dollar. Bhandari explained that a 1% depreciation in the rupee typically translates to a 25 to 30 basis point improvement in margins for the IT sector. "That's a very short-term thing. Eventually, if you look at the long-term trends, the currency benefit is not kept by the IT companies; it's eventually passed on to the clients," he clarified.

For the upcoming year, Nomura forecasts the rupee to average around ₹89 to the dollar, compared to approximately ₹87.5/$ this year. Based on this, the firm is factoring in a close to 30 basis point margin improvement for large-cap IT companies.

Addressing investor sentiment, Bhandari acknowledged significant pushback, largely centred on AI and its potential impact on growth. He said that globally, the tech narrative is focused on identifying "winners versus losers," and Indian IT services are currently perceived as "AI losers." This perception stems from the sector not having significantly participated in the AI wave so far and facing revenue deflation from accelerated discounting offered to clients.

"The pushback generally what we get from the clients is, you know, when will that perception of IT companies being an AI loser change into the other side," Bhandari stated. He added that even without considering AI, the sector is viewed as having low growth compared to the highs seen during the COVID-19 period.

However, Bhandari argued that the long-term outlook remains promising. He pointed out that historically, IT services businesses have benefited from technological shifts, as enterprises invariably anchor themselves to new technologies where innovation is concentrated. "This time is not going to be any different, according to us. It's more of a timing issue," he asserted. The delay, he explained, is longer than expected because clear winners in the AI space have yet to emerge, with new and better models appearing constantly, making it difficult for enterprises to commit to a specific AI stack.

Despite these challenges, Nomura's stance on the sector has turned more positive. Bhandari highlighted emerging evidence that the narrative around AI is improving for IT services. "We are already seeing evidences of the POC (proof-of-concept) projects moving to point solutions, which is generally the start of AI spending," he said.

He also pointed to commentaries from global IT service firms, such as Cognizant, which indicate the beginning of smaller AI-related projects. Furthermore, he anticipates that as large global cloud companies seek to monetise their significant AI investments, spending on the application layer will increase, creating opportunities for Indian IT services firms to participate.

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Nomura sees IT sector growth improving but perception on AI remains a hurdle

Moneycontrol

Revenue growth for Indian information technology (IT) companies is poised for a marginal improvement in the upcoming financial year, though negative investor perception surrounding artificial intelligence (AI) remains a challenge, according to a recent Nomura report. In an interview with CNBC TV18, Abhishek Bhandari, Executive Director for Technology and Internet at Nomura, detailed the firm's outlook, projecting that large-cap IT firms could see dollar revenue growth accelerate to 4.5% from the current 3%, with mid-caps continuing to outpace their larger peers.

Addressing the impact of currency fluctuations, Bhandari explained the short-term benefits of a depreciating rupee. "The math is typically 1% depreciation in rupee yields around 25 to 30 basis point improvement in margins for the IT sector," he stated. However, he clarified that this is a temporary advantage, as these gains are eventually passed on to clients over the long term. For the next financial year, Nomura forecasts the rupee to average around ₹89 to the dollar, compared to ₹87.5 this year, leading the firm to bake in a nearly 30 basis point margin improvement for large-cap companies.

The primary pushback from investors, Bhandari noted, is centered on the perception of the IT services industry as an 'AI loser'. "Globally the big narrative going on in the tech space is identifying winners versus losers… and IT services in general are perceived to be quote unquote AI losers because they haven't really participated in the AI wave so far," he said. This perception has been compounded by revenue deflation from accelerated discounting that firms are forced to offer customers.

Despite this, Bhandari argued that IT services businesses are historically predicated on technology changes and ultimately benefit from them. He believes the current cycle will be no different, attributing the delay to the rapid pace of innovation in AI. With new and better models emerging constantly, enterprises find it difficult to anchor themselves to a single AI stack, thus postponing large-scale spending. "It's more of a timing issue. The delay actually has been longer than expected because the winners in AI is still not identified," Bhandari explained.

Reflecting this evolving landscape, Nomura has adopted a more positive stance on the sector compared to the previous year. Bhandari highlighted emerging evidence that is shifting this perspective. "We are already seeing evidences of the POC (proof of concept) projects moving to point solutions which is generally the start of AI spending," he observed. He also pointed to commentary from global IT giants like Cognizant, which are indicating the commencement of smaller AI projects.

Ultimately, Nomura anticipates that the large cloud companies that have invested heavily in AI infrastructure will need to start monetising those investments. This will inevitably drive spending on the application layer, where Indian IT services companies are well-positioned to participate. "The narrative on AI is likely to get better from the IT services point of view," Bhandari concluded, signaling a cautiously optimistic outlook for the sector.

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Electronic Components & Manufacturing Stocks Q3 Teardown: Knowles (NYSE:KN) Vs The Rest

Stock Story

As the Q3 earnings season wraps, let’s dig into this quarter’s best and worst performers in the electronic components & manufacturing industry, including Knowles and its peers.

The sector could see higher demand as the prevalence of advanced electronics increases in industries such as automotive, healthcare, aerospace, and computing. The high-performance components and contract manufacturing expertise required for autonomous vehicles and cloud computing datacenters, for instance, will benefit companies in the space. However, headwinds include geopolitical risks, particularly U.S.-China trade tensions that could disrupt component sourcing and production as the Trump administration takes an increasingly antagonizing stance on foreign relations. Additionally, stringent environmental regulations on e-waste and emissions could force the industry to pivot in potentially costly ways.

The 10 electronic components & manufacturing stocks we track reported a very strong Q3. As a group, revenues beat analysts’ consensus estimates by 4.7% while next quarter’s revenue guidance was in line.

In light of this news, share prices of the companies have held steady as they are up 4.9% on average since the latest earnings results.

Knowles

With roots dating back to 1946 and a focus on components that must perform flawlessly in critical situations, Knowles designs and manufactures specialized electronic components like high-performance capacitors, microphones, and speakers for medical technology, defense, and industrial applications.

Knowles reported revenues of $152.9 million, up 7.3% year on year. This print exceeded analysts’ expectations by 2.6%. Overall, it was a very strong quarter for the company with a solid beat of analysts’ revenue estimates and a beat of analysts’ EPS estimates.

“We continued to deliver on expectations in the third quarter of 2025 with revenues, cash provided by operating activities, and non-GAAP diluted EPS from continuing operations all above the mid-point of our guided range. Our cash generated by operating activities in the quarter was again strong, allowing us to repurchase $20 million in shares and reduce debt by $15 million” commented Jeffrey Niew, President, and CEO of Knowles.

Unsurprisingly, the stock is down 4.1% since reporting and currently trades at $23.02.

Is now the time to buy Knowles? Access our full analysis of the earnings results here, it’s free for active Edge members.

Best Q3: Amphenol

With over 90 years of connecting the world's technologies, Amphenol designs and manufactures connectors, cables, sensors, and interconnect systems that enable electrical and electronic connections across virtually every industry.

Amphenol reported revenues of $6.19 billion, up 53.4% year on year, outperforming analysts’ expectations by 10.9%. The business had an incredible quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ EPS guidance for next quarter estimates.

Amphenol achieved the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems happy with the results as the stock is up 12.4% since reporting. It currently trades at $139.93.

Is now the time to buy Amphenol? Access our full analysis of the earnings results here, it’s free for active Edge members.

Weakest Q3: CTS

With roots dating back to 1896 and a global manufacturing footprint, CTS designs and manufactures sensors, connectivity components, and actuators for aerospace, defense, industrial, medical, and transportation markets.

CTS reported revenues of $143 million, up 8% year on year, exceeding analysts’ expectations by 4.8%. It was a satisfactory quarter as it also posted a solid beat of analysts’ revenue estimates but a significant miss of analysts’ EPS estimates.

Interestingly, the stock is up 6.3% since the results and currently trades at $45.13.

Read our full analysis of CTS’s results here.

TTM Technologies

As one of the world's largest printed circuit board manufacturers with facilities spanning North America and Asia, TTM Technologies manufactures printed circuit boards (PCBs) and radio frequency (RF) components for aerospace, defense, automotive, and telecommunications industries.

TTM Technologies reported revenues of $752.7 million, up 22.1% year on year. This number surpassed analysts’ expectations by 6%. It was a stunning quarter as it also produced an impressive beat of analysts’ EPS guidance for next quarter estimates and a solid beat of analysts’ revenue estimates.

The stock is up 7.1% since reporting and currently trades at $67.75.

Read our full, actionable report on TTM Technologies here, it’s free for active Edge members.

Jabil

With manufacturing facilities spanning the globe from China to Mexico to the United States, Jabil provides electronics design, manufacturing, and supply chain solutions to companies across various industries, from healthcare to automotive to cloud computing.

Jabil reported revenues of $8.25 billion, up 18.5% year on year. This result topped analysts’ expectations by 9.5%. Overall, it was an exceptional quarter as it also put up an impressive beat of analysts’ EPS guidance for next quarter estimates and a solid beat of analysts’ revenue estimates.

Jabil had the weakest full-year guidance update among its peers. The stock is down 4.9% since reporting and currently trades at $214.29.

Read our full, actionable report on Jabil here, it’s free for active Edge members.

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