Athira Sethu
Kochi, 21 Oct 2025
India’s Information Technology (IT) sector is beginning to reflect modest signs of revival, as per Goldman Sachs’ report. But the future, particularly the year 2026, remains unclear.
Demand for IT services is starting to stabilize, the report states, but we do not yet know how robust this recovery will be. One major reason for the doubt is artificial intelligence (AI). The vast majority of companies are applying AI to enable them to work faster and smarter. This is saving them money, but it also means that they might spend less on customary IT services.
During the latest quarter, all the major IT firms in India registered some growth in revenue. As a whole, the industry increased by 1.5% over the previous quarter. The following quarter (ending Dec 2025) is likely to follow the same pattern with approximately 1.7% growth.
But for the entire year (FY26), overall growth is likely to be very minimal, only 1.1% against last year. In the next year (FY27), the industry can grow at a higher rate, up to 5.4%, if the situation improves.
Firms are being cautious with expenditures because of uncertainty in the worldwide economy. Meanwhile, AI technologies are enabling firms to accomplish more with fewer employees, impacting hiring as well as budgets for IT projects.
Nevertheless, there are a few encouraging signs. Most companies’ operating profits have risen. Recruitment is also picking up pace after several months of a downtrend. Large IT deals were inked in the fourth quarter, indicating that customers continue to have faith in India’s IT sector for large-scale, long-term contracts.
But competition is stiff, and the prices are under stress. Projects are advancing in slow motion, and firms are cautious. Growth in the future would be between 0.5% to 2.5% every quarter, and that is not very rapid but indicates some promise.
Growth can settle back into the normal path in the long term if global businesses begin to spend more on IT once again. Major industries such as financial services, the healthcare industry, and manufacturing can drive growth upwards in FY27.
However, currently, the picture is still not clear. Most clients are reducing budgets or altering priorities, and hence, real growth may not set in until after 2026.
