Q3FY26 IT Sector Report - IT Hardware to Shine Amid Seasonal Weakness

We expect IT hardware stocks to deliver a strong quarter, driven by robust demand for peripherals, PCs, and software despite it being a seasonally weak period. Component prices have more than doubled due to supply constraints, which should translate into higher ASPs and margin tailwinds for distributors. Netweb is likely to perform well on the back of strong execution of the AI Mission deals and continued momentum in the enterprise segment. Aurionpro should sustain its growth trajectory, supported by deal wins announced in Q3. In contrast, IT services companies are expected to report a softer quarter due to furloughs and the holiday season. We expect demand to improve in H2FY26, particularly for players with higher India exposure such as Netweb, Aurionpro, Rashi, and Redington.

Netweb Technologies

Netweb should post a robust quarter following its deal wins from AI mission in Q2. Enterprise demand continues to remain solid. The recent hikes in component prices won’t have an impact in Q3 as the company has enough inventory, but there could be some delay/slowdown in new deals from Q4 if prices remain at this range. Margins should be in the 13–14% range, driven by higher contribution from AI mission deals.

Aurionpro Solutions

Aurionpro should continue its strong momentum in Q3 on the back of deal wins across banking and TIG. Key highlights include – Rs 630 mn banking deal in Singapore, PSU bank deal in India for Rs 300-400 mn. The company is expected to sustain its 25%+ growth trajectory, with margins at the lower end of the 20–21% range. Order book should rise to Rs 16 Bn+ on the back of these wins.

Rashi Peripherals

Rashi is expected to sustain high-teens YoY growth, supported by strong demand for PCs, desktops, and peripherals in a seasonally weak quarter. Q3 is a seasonally soft quarter as it is post the festive season (Diwali). The recent price hikes seen in peripherals (RAMs, Storage) should help with higher ASPs.  Margins are likely to remain at the upper band of 2.5–3.0% on the back of higher channel sales.

Redington

Redington is expected to deliver a strong quarter despite it being a seasonally weak quarter for the company. Software and cloud should continue its momentum (40%+ YoY growth). ESG should continue its double-digit growth. Margins are expected to improve by 10 bps; Arena losses are expected to narrow.

R Systems

Q4 is a seasonally weak quarter for R Systems on the back of furloughs and holidays (2 days lost). This will be the first quarter post the acquisition of Novigo. We expect 1-1.5 months of Novigo’s revenue ($2.5-3 mn) to reflect in Q4. We expect margins to also improve by 30-50 bps as Novigo operates at 20%+ margins. Deal win momentum should continue in Q4 albeit the size of deals should be smaller vs Q3.

Saksoft

Q3 is a soft quarter for Saksoft due to furloughs and holiday season. We expect 3% QoQ growth on the back of favorable currency movements, with a strong GBP and USD likely to aid growth. Margins are likely to be at the upper end of 18-19%.

Indegene

Indegene is expected to see a bump in growth on the back of the Biopharm acquisition. We expect 2-2.5 months of revenues from Biopharm in Q3. Overall growth is expected to be in the mid-teens on a YoY basis. Margins should improve slightly QoQ.

Valuation & Risks:

We expect Netweb, Rashi, Redington and Aurionpro to deliver a strong quarter, while R Systems, Indegene and Saksoft will have a soft quarter. Our pecking order will be Netweb (good entry point) Aurionpro Solutions (Attractive valuation), Rashi Peripherals (strong quarter), Redington (strong quarter), Saksoft (inexpensive valuations) and Indegene (limited near-term upside).

Click to download the full IT Sector Report 3QFY26 Company Update

Analyst:

• Vinay Menon - Senior Research Analyst, Institutional Equities (NISM-201600112117)
• Miloni Mehta - Research Associate, Institutional Equities (NISM-201800127664)

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FAQs on IT sector report 3QFY26

Why is IT hardware expected to outperform in Q3FY26?

Despite being a seasonally weak quarter, strong demand for PCs, peripherals, software, and AI infrastructure, combined with sharp component price hikes, is expected to lift ASPs and margins for hardware distributors.

Which stocks are best positioned in this cycle?

Netweb, Aurionpro, Rashi Peripherals, and Redington are expected to deliver stronger quarters due to AI deal execution, enterprise demand, and resilient distribution-led growth.

Why are IT services companies facing a softer quarter?

Seasonal furloughs, holiday-related downtime, and deal execution pauses typically impact Q3, resulting in muted growth for IT services players like R Systems, Saksoft, and Indegene.

How does AI and enterprise demand influence earnings?

AI mission deals, cloud adoption, and enterprise modernization projects are driving higher-margin revenue streams, particularly benefiting companies with strong India and enterprise exposure.

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