By Anirudha Yerunkar

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India’s IT sector is facing a phase of subdued growth with industry forecasts and recent earnings suggesting a muted outlook for FY26. However a rebound could be on the horizon in FY27 supported by improving conditions in key export markets and stronger adoption of emerging technologies. HSBC Global Research noted that while near-term discretionary spending by clients remains soft momentum is expected to pick up in the following fiscal year particularly as enterprise adoption of artificial intelligence (AI) gains traction.
“While the near-term demand environment remains soft and unchanged FY27 is likely to see pick-up in demand driven by recovery in the US macro and increase in demand from IT companies looking to drive enterprise scale AI adoption” HSBC Global Research said.
What Are Challenges For IT Sector?
Key indicators show that the Indian IT sector has faced challenges related to global macroeconomic uncertainty client cost optimisation and delayed decision-making. Major Indian IT firms such as TCS Infosys and HCLTech reported healthy large deal bookings and strong pipelines in the first quarter of FY26 yet actual revenue growth guidance remains restrained at 1–5 per cent for the year.
Geopolitical tensions supply chain challenges and industry-specific factors (for example caution in the BFSI and automotive verticals) continue to cause project deferrals or reduce discretionary spend.
Over the past year the NSE IT index has underperformed broader Indian market benchmarks reflecting investor caution amid uncertain growth prospects even as bookings and deal pipelines remain robust for most large IT companies.
Industry analysis highlights AI as the central driver of the next growth cycle for Indian IT services. Management commentary from leading Indian and global IT firms suggests that most client AI projects to date have focused on productivity improvements but are increasingly shifting towards driving business growth.
Enterprise-scale AI adoption is anticipated to ramp up in FY27 providing a significant new opportunity for Indian IT providers to deliver transformation projects and managed services. Accenture which has a substantial chunk of employees in India nearly doubled Gen AI bookings to USD 5.9 billion in FY25 (September-August).
The anticipated acceleration in demand for enterprise-scale digital transformation and AI-led projects could drive a 200–300 basis points improvement in revenue growth for Indian IT services companies.
(With Inputs From PTI)