Coforge Ltd., Infosys, TCS in Focus After ₹6 Lakh Crore IT Stock Rout – February 2026 Analysis

Breaking: Coforge Ltd., Infosys, TCS in Focus After ₹6 Lakh Crore IT Stock Rout – February 2026 Analysis

The Indian IT services sector is reeling from an unprecedented market rout, witnessing a staggering loss of over ₹6 lakh crore in market capitalization across eight trading sessions in mid-February 2026. This significant downturn, primarily fueled by intensified fears of Artificial Intelligence (AI) disruption, has cast a sharp spotlight on major players like Coforge Ltd., Infosys, and Tata Consultancy Services (TCS), with many IT stocks hitting multi-year lows. As global macroeconomic headwinds persist and the specter of generative AI reshapes traditional business models, investors are keenly analyzing the sector's Q3 FY26 performance and future outlook.

The Catalyst

The seismic shift in investor sentiment, leading to the substantial IT stock rout, can be attributed to a confluence of global and technological factors. The primary trigger was the "Anthropic shock," following the launch of an enterprise-focused AI tool by startup Anthropic, which showcased advanced automation capabilities for tasks such as legal compliance and complex coding. This development amplified concerns that AI could fundamentally disrupt the traditional "headcount-led" model prevalent in Indian IT.

Adding to these AI disruption fears are persistent global tech sector weaknesses and jitters ahead of key US earnings reports, given that Indian IT companies derive a significant portion of their revenues from the American market. Elevated interest rates in the United States have further compressed valuations for growth-oriented technology stocks, making them less attractive. The sector has also contended with uneven demand conditions and selective spending from global clients. A telling sign of this cautious outlook was the substantial withdrawal of Foreign Institutional Investors (FIIs), who divested over ₹10,956 crore from the Indian IT sector in the first half of February 2026 alone, reallocating funds to other sectors and US-listed pure AI plays.

Financial Forensics

The Q3 FY26 (ended December 31, 2025) earnings season presented a mixed bag for leading Indian IT firms, revealing a dichotomy between revenue growth and profitability pressures.

Coforge Ltd.: The mid-cap IT firm reported robust top-line growth, with consolidated revenue reaching ₹4,188.10 crore, marking an impressive 28.54% year-on-year (YoY) increase and a 5.1% sequential (QoQ) rise in INR terms. However, its consolidated Profit After Tax (PAT) stood at ₹250.20 crore, a 16.10% YoY increase, but notably a sharp 33.42% sequential decline from Q2 FY26. Excluding extraordinary items, PAT was ₹364 crore, showing a 71.2% YoY increase. The company's EBITDA margin improved to 17.4%, up 191 basis points (bps) YoY. Coforge also secured significant deal wins, with an order intake of $593 million and a 12-month executable order book growing by 30.4% YoY.

Infosys: India's second-largest IT services company reported consolidated revenue of ₹45,479 crore, reflecting an 8.9% YoY and 2.2% QoQ growth in INR terms. In constant currency, revenue grew 1.7% YoY and 0.6% QoQ. However, net profit came under pressure, declining by 2.2% YoY and 9.6% QoQ to ₹6,654 crore. The reported operating margin was 18.4%, while the adjusted operating margin stood at 21.2%. Infosys demonstrated strong deal momentum, bagging large deals with a Total Contract Value (TCV) of $4.8 billion, with 57% being net new business. The company maintained its FY26 revenue growth guidance of 3-3.5% in constant currency and an operating margin outlook of 20-22%.

Tata Consultancy Services (TCS): The IT bellwether reported consolidated revenue from operations at ₹67,087 crore, growing 5% YoY and 2% QoQ in INR terms. Constant currency revenue grew 0.8% QoQ and 4.9% YoY. Despite the top-line growth, consolidated net profit declined by 14% YoY to ₹10,657 crore, primarily impacted by provisions for a one-time charge related to labour code and legal claims, as well as restructuring expenses. The net margin stood at 20%. TCS reported annualized AI services revenue of $1.8 billion, demonstrating a robust 17.3% QoQ increase. The total contract value for Q3 FY26 was $9.3 billion.

Q3 FY26 Performance Snapshot: Key Indian IT Players

Company	Q3 FY26 Revenue (₹ Crore)	YoY Revenue Growth (%) (INR)	Q3 FY26 PAT (₹ Crore)	YoY PAT Growth (%)	Q3 FY26 Operating Margin (%)	Large Deal Wins (USD Billion)
Coforge	₹4,188.10	28.54%	₹250.20	16.10%	17.4% (EBITDA)	$0.593
Infosys	₹45,479	8.9%	₹6,654	-2.2%	18.4% (Reported)	$4.8
TCS	₹67,087	5%	₹10,657	-14%	20% (Net Margin)	$9.3

Note: Operating margin for Coforge is EBITDA margin. For Infosys, it is reported operating margin. For TCS, it is net margin, as operating margin details were less consistent across snippets.

Market Impact

The significant market rout in February 2026 saw the Nifty IT index plunge by 14% in the first half of the month, touching 10-month lows. Shares of Infosys and TCS have faced considerable selling pressure, with Infosys hitting an intraday low of ₹1,285 on February 24, 2026, and falling 7.32% over five trading days. Similarly, TCS crashed nearly 17% in February 2026, touching a 5-year low of ₹2,585 on February 13, 2026, its lowest level since September 2020. Coforge also experienced a sharp intraday decline, falling 5.45% on February 24, 2026, and a cumulative 12.52% over six trading sessions.

Technically, many IT stocks, including Infosys and TCS, are trading below all key moving averages, indicating a bearish trend across multiple timeframes. The overall sentiment reflects investor caution and reassessment of valuations amid the evolving competitive landscape. However, the Nifty IT index's current valuation, near its 10-year average after the sharp fall, suggests attractive entry points for tactical bets.

Key Takeaways for Investors

• AI as a Double-Edged Sword: While AI disruption has caused near-term panic, it also presents a significant long-term opportunity for Indian IT firms that successfully integrate and leverage AI-led services. Major firms are already reporting that 15-20% of their new order book is directly tied to AI and automation.
• Valuation Reset: The recent rout has led to a significant correction in IT stock valuations. The Indian IT sector is now trading at attractive levels, with valuations dropping below its 10-year average, presenting a potential "buy on dips" opportunity for long-term investors.
• Focus on Fundamentally Strong Players: Companies like Coforge, Infosys, and TCS, despite current headwinds, boast strong fundamentals, robust deal pipelines, and a strategic focus on emerging technologies. These factors could provide resilience and drive recovery.
• Watch Global Cues: The performance of Indian IT remains closely linked to global macroeconomic conditions, particularly IT spending in the US and Europe. Investors should monitor inflation data, interest rate decisions by central banks, and global tech sector health.
• Long-Term Digital Transformation: The underlying demand for digital transformation, cloud adoption, and cybersecurity remains strong, underpinning the long-term growth trajectory of the Indian IT sector. Nasscom projects India's technology sector revenue to grow 6.1% to $315 billion in FY26, supported by AI-led services.

FinScann Verdict

The current downturn in the Indian IT sector, triggered by a substantial ₹6 lakh crore market cap erosion and intensified AI disruption fears, presents a challenging but potentially transformative period. While short-term volatility is expected, FinScann believes that fundamentally strong players like Coforge, Infosys, and TCS are well-positioned to navigate this shift by leveraging their strategic investments in AI, robust deal pipelines, and deep client relationships. The recent correction offers a compelling valuation reset for discerning long-term investors.

What is a "Moat" in the context of IT companies, and how do Indian IT leaders possess it? A: In finance, a "moat" refers to a company's sustainable competitive advantage that protects its long-term profits and market share from rival firms. For Indian IT leaders like TCS and Infosys, their moats include deep-seated client relationships spanning decades, large-scale delivery capabilities, global presence, proprietary technological expertise, and the ability to attract and retain a vast pool of skilled talent. These factors create high switching costs for clients and enable these companies to offer complex, integrated solutions that smaller competitors cannot easily replicate. For a company like Coforge, its niche expertise in specific industry verticals and strong client-centric approach also act as competitive advantages.

Q: Is the Indian IT sector recovering from this rout? A: The Indian IT sector is showing early signs of a gradual recovery, with improving deal wins and stabilizing revenue outlooks. Despite lagging global peers in revenue growth in some recent quarters, the strong performance in securing new deals signals a healthier pipeline for coming quarters. Analysts also highlight that clients are warming up to AI projects, potentially opening new revenue streams for Indian IT firms.

Q: What caused the IT stock rout in February 2026? A: The primary cause was intensified fears surrounding AI disruption, particularly after the launch of advanced AI tools that could automate traditional IT services. This was compounded by global tech sector weakness, caution ahead of US earnings, and higher interest rates, which collectively led to significant FII selling and a broad-based market correction.

Q: Should I invest in Coforge Ltd. after its Q3 FY26 results and recent stock performance? A: Coforge delivered strong revenue growth in Q3 FY26, signaling robust demand and successful client acquisition. While the stock has seen recent price pressure and a sequential decline in PAT, its healthy order book and focus on digital transformation and AI remain positive indicators. Analysts generally expect its share price to rise in the coming year, with some anticipating targets around ₹1,770.30. FinScann's analysis suggests a thorough review of your investment horizon and risk appetite, considering its growth potential amidst sectoral volatility.

Disclaimer: For information only; not investment advice. Stock market investments carry risks. Please consult a SEBI-registered advisor before investing. FinScann assumes no liability for decisions made based on this report.