Indian IT firms near-term outlook muted as clients cut spending, AI risks mount

BENGALURU: Revenue growth for India’s top IT firms will stay muted this fiscal year, as gains from artificial intelligence would be blunted with clients cutting spending amid macroeconomic and geopolitical uncertainty, analysts said.

The Nifty IT index, the worst performing sector of 2026, shed roughly $26 billion in market value this week after earnings from market leaders Tata Consultancy Services and Infosys disappointed investors amid worries that agentic AI would disrupt the $315 billion sector and cannibalise earnings.

India’s top five IT firms are expected to post muted revenue growth of about 3%-4% in the near term, said Sushovan Nayak, analyst at Anand Rathi.

The sector, which employs about 5.9 million people, had last reported double-digit revenue growth in the March 2023 quarter.

Analysts had expected a falling rupee to boost revenue by 10%

across the sector.

The U.S., which accounts for more than half of the revenue at most large Indian IT firms, has seen softer deal pipelines, while uncertainty surrounding immigration and tariffs persists, and geopolitical conflicts further delay long-term technology spending decisions.

India’s Infosys pegs fiscal year 2027 revenue growth at 1.5%-3.5%

The slowdown was the most acute in the banking and financial services, which is a key revenue driver for the sector.

TCS posted its first annual revenue decline in more than two decades, and said that new AI models and tools in the market did not hurt demand for its offerings.

Infosys, HCLTech and Wipro trimmed their forecast for fiscal 2027’s revenue growth.

Despite near-term pressures, analysts remain confident that IT companies will eventually leverage AI to defend margins and unlock new growth opportunities.

“Revenue from AI is growing at a fast pace, but it’s coming off a very low base and is hardly 5% of total revenue,” said Centrum Broking’s Piyush Pandey, adding that AI was weighing on pricing, particularly in legacy contracts.

Given that, mid-sized IT firms such as LTM and Persistent Systems that have stronger digital and AI-led exposure may outperform, said Nayak.

The benchmark Nifty 50 is down 8.6% this year so far.