IT sector sees subdued growth in FY26, AI-powered rebound in next fiscal: Report
New Delhi: The Indian IT sector is bracing for muted growth in FY26, with major firms projecting only 1–5 per cent revenue expansion, even as large deal wins and strong pipelines offer some comfort. Analysts expect a recovery in FY27, driven by improving global conditions and rising adoption of artificial intelligence (AI).
HSBC Global Research noted that discretionary client spending remains subdued due to macroeconomic uncertainty, cost optimisation, and delayed decision-making, but enterprise-scale AI adoption could unlock fresh demand in FY27.
“While near-term demand remains soft, FY27 is likely to see pick-up driven by recovery in the US and increased demand for AI-led transformation,” it said.
Despite robust deal activity, firms continue to face project deferrals amid geopolitical tensions, supply chain disruptions, and caution in key sectors such as BFSI and automotive.
The NSE IT index has underperformed broader market benchmarks in the past year, reflecting investor concerns over growth. AI is emerging as the central driver of the next growth cycle. While initial projects have focused on productivity, enterprises are now moving towards revenue-enhancing applications.
Accenture, with a large workforce in India, nearly doubled Gen AI bookings to $5.9 billion in FY25.
Among Indian majors, TCS reported a Q1FY26 Total Contract Value (TCV) of $9.4 billion, supported by a robust pipeline across geographies. Infosys secured $3.8 billion in large deals, including multiple vendor consolidation contracts exceeding $1 billion.
Wipro booked $5 billion in Q1, with $2.7 billion in large deals and two mega deals, highlighting growing interest in AI and vendor consolidation despite muted overall demand.
HCLTech and peers also reported strong deal signings, but most clients remain cautious on discretionary spends. Industry consensus suggests that as macro conditions in the US and Europe stabilise, Indian IT firms could see a 200–300 basis points revenue growth improvement in FY27.
For now, the sector remains in a holding pattern—balancing strong deal flow with near-term demand headwinds—while looking to AI-led transformation as the key catalyst for the next growth cycle. Agencies
