According to a recent report by CareEdge Ratings, the IT sector is set to see flat revenue growth of 0 to 2 % y-o-y in FY26.
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The Indian Information Technology (IT) sector is likely to see flat revenue growth of 0 to 2 per cent year-on-year in the current financial year (FY26), according to a recent report by CareEdge Ratings.
The slowdown is mainly due to continued macroeconomic uncertainties and cost pressures affecting client spending across sectors. It stated, “The Indian IT sector is expected to witness a flat revenue growth of 0 to 2 per cent in FY26 as compared to the previous year in terms of constant currency revenue growth.”
The report highlighted that the IT industry has been witnessing muted growth, with clients delaying or deferring discretionary projects. While the demand environment remains weak, a healthy deal pipeline offers hope. The report mentioned that this pipeline is poised to convert into actual wins in the near term, giving some revenue visibility for the coming quarters. Despite challenges, the report highlighted that the Indian IT companies are investing in key areas such as cloud transformation, data analytics, generative AI, cybersecurity, engineering research and development (ER&D), ESG initiatives, and machine learning to stay competitive and meet evolving client demands.
The Information Technology and Information Technology-Enabled Services (IT/ITES) sector plays a critical role in strengthening India’s position as a preferred global investment destination.With increasing digital adoption and growing demand for emerging technologies like 5G, advanced data analytics, artificial intelligence, cloud computing, cybersecurity, robotics, and blockchain, there are strong long-term growth opportunities for Indian IT firms. However, the report flagged rising uncertainty in the US market, India’s largest market for IT exports, as a significant concern. A major portion of revenue for Indian IT firms comes from the US, and any shifts in US policies, tariffs, or market movements directly impact performance.
The report stated “The uncertainty arising from tariffs and movements in the US market is a significant concern for the IT industry, as a large proportion of its revenues are derived from the US market”. In conclusion, while the Indian IT sector is expected to register low growth in FY26, the report added that the IT-software industry has been re-aligning its offerings to cater to the evolving requirements of its clients with respect to emerging technologies to become more effective.
Published on July 24, 2025