Indian information technology (IT) companies are anticipated to face continued challenges in fiscal year 2026, primarily due to reduced discretionary spending by U.S. clients and global economic uncertainties. Accenture’s recent quarterly report highlighted constrained investments in discretionary projects and no significant increase in client budgets, serving as a bellwether for the Indian IT industry.
Analysts from Kotak Institutional Equities have noted that a softening demand recovery and weak flow of large deals in fiscal 2025 are expected to result in lower incremental revenues from such deals in fiscal 2026 for major Indian IT firms. Citi Research forecasts a modest 4% revenue growth for these companies in fiscal 2026, mirroring the subdued performance of fiscal 2025. Similarly, ICRA projects a revenue growth of 4% to 6% in U.S. dollar terms for Indian IT services companies in fiscal 2026, reflecting ongoing macroeconomic uncertainties in key markets like the U.S. and Europe.
The Indian IT index has declined by 15.3% this year, marking its worst quarter since June 2022, with leading firms such as Tata Consultancy Services (TCS), Wipro, Infosys, and HCLTech experiencing losses ranging from 11.2% to 18.1%. This downturn is attributed to global trade tensions, new U.S. tariffs, and concerns over a potential slowdown in the U.S., a crucial market for Indian IT companies.
In addition to these challenges, the early stages of generative artificial intelligence (AI) adoption are expected to present net headwinds for these companies. The recent uncertainty has led clients across sectors to adopt a cautious approach, potentially curtailing their spending.
Overall, the Indian IT sector is bracing for a period of subdued growth, with analysts advising caution amid the evolving global economic landscape.
