Zoho CEO Sridhar Vembu said it’s not the US President Donald Trump-imposed tariffs or the sudden uptick in Artificial Intelligence (AI) use responsible for the “cyclical downturn” of the Indian IT services companies, but their own inefficiencies.
This comes after Indian IT giants – Infosys, Tata Consultancy Services and Wipro– reported disappointing earnings this quarter amid jitters in their key markets, signalling a potential hiring slowdown across the sector this year.
Vembu, reacting to the news of the companies’ disappointing earnings, said his “operating thesis” says, “What we are seeing is not just a cyclical downturn, and it is not just AI-related. Even without the uncertainty induced by tariffs, there was trouble ahead.”
The Zoho CEO said the software industry has been “quite inefficient, both in products and services”. “These inefficiencies have accumulated over decades of a prolonged asset bubble.”
Sadly, Vembu said, a lot of those inefficiencies have been adopted in India.
“Our jobs came to depend on them. The IT industry sucked in talent that may have gone into manufacturing or infrastructure (for example).”
He highlighted that India is “only in the early stages of a long reckoning”. “My thesis is that the last 30 years are not a good guide post to the next 30 years. We are truly at an inflection point.”
“We have to challenge our assumptions and do fresh thinking,” he added.
In March this year, Vembu said IT industry has “sucked all the oxygen”, leaving ‘financial bubbles’, which can suck resources and leave us with decreased capabilities.
What do the IT sector Q4 earnings signal?
The largest IT players’ Q4 numbers and growth outlook indicate the worst may not be behind. While demand has been weak for the last several quarters amid elevated interest rates and sticky inflation, Trump’s tariff policies have aggravated worries over economic growth.
Most experts feel the US may see a recession, and a trade war will significantly dent global economic growth.
The sector appears to be at an inflection point as the industry grapples with uncertainty stemming from Trump’s tariffs, the economic slowdown, and the rise of artificial intelligence (AI).
Experts say the financial year 2025-2026 would be challenging, even though it could be slightly better than the last financial year.
TCS vs Infosys vs Wipro Q4 results
TCS reported the slowest revenue growth in four years at ₹64,479 crore against ₹61,237 crore posted in the same period last fiscal. Its consolidated profit after tax (PAT) for Q4FY25 declined 1.7 per cent to ₹12,224 crore against the profit of ₹12,434 crore reported for the corresponding quarter of the previous financial year.
Infosys reported an 11.75 per cent year-on-year (YoY) decline in consolidated net profit for Q4FY25 to ₹7,033 crore. The company’s revenue from operations for the quarter under review rose 8 per cent YoY to ₹40,925 crore from ₹37,923 crore in the corresponding quarter of the last financial year.
Infosys projected flat to 3 per cent revenue growth for FY26 in constant currency terms, its weakest guidance since April 2009.
Wipro reported a 26 per cent year-on-year jump in consolidated net profit to ₹3,569.6 crore. Consolidated revenue from operations for the quarter stood almost flat at ₹22,504.20 crore.
