Will India’s IT Services Firms Achieve 6-7% Growth in FY27 Amid AI Advancements?
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Synopsis
A new report reveals that India's IT services sector is poised for a growth spurt in FY27, with potential revenue increases of 5-6%. The market dynamics, influenced by AI advancements and a strong US economy, could reshape the industry landscape. Discover the implications for major players and the future of IT services in India.
Key Takeaways
- Projected revenue growth of 5-6% for Indian IT firms in FY27.
- AI adoption may reduce IT service values by 8-10%.
- Strong US economy is likely to boost technology spending.
- Increased project volumes are helping offset potential revenue declines.
- TCS is revising wages while planning staff reductions.
New Delhi, Sep 17 (NationPress) Indian IT services companies are projected to experience a revenue increase of 5-6 percent in the upcoming fiscal year (FY27), which could translate to an 8-10 percent rise in workload, according to a report released on Wednesday.
The report from HSBC Global Investment Research highlights that India's IT firms stand to gain from a robust macroeconomic environment in the US, as leading American clients have reported some of their most successful quarters in recent years.
Analysts at the research firm anticipate that this trend will bolster business confidence and lead to increased spending on technology through 2025, counterbalancing some of the deflationary impacts associated with the adoption of artificial intelligence.
As AI agents evolve into sophisticated multi-agent systems, prompting possible redesigns of enterprise software architectures and infrastructure, this transition could unveil new prospects for Indian IT firms, according to the findings.
Moreover, the report references industry forecasts indicating that AI may diminish the value of IT services by 8-10 percent over the next three to four years as contracts are renewed, resulting in an annual effect of up to 3-4 percent during 2025-27.
Nonetheless, Indian IT companies have reported that they have managed to offset these challenges through increased project volumes from clients, allowing total revenues to continue their upward trajectory.
"In 2026, we foresee a dynamic interplay between this deflationary influence and macroeconomic advantages," stated HSBC.
The firm dismissed apprehensions regarding Agentic AI or advanced multi-agent systems potentially disrupting the software industry and affecting IT services in the long haul. While hyperscalers are capturing a larger portion of enterprise technology budgets, HSBC contends that a complete transition away from services is improbable.
India's largest IT services company, Tata Consultancy Services (TCS), announced a wage adjustment in August for approximately 80 percent of its employees, primarily targeting mid- to junior-level staff. This decision comes even as the company prepares to reduce its workforce by around 12,000 employees, representing 2 percent of its total staff, in 2025.
Point of View
I believe that India's IT services sector is at a pivotal point. The integration of AI technologies presents both challenges and opportunities. While there are concerns about potential revenue declines due to AI, the industry's resilience and adaptability will be crucial in navigating these changes. It's essential to monitor these developments closely as they unfold.
NationPress
21/09/2025
Frequently Asked Questions
What revenue growth is expected for India's IT services firms in FY27?
India's IT services firms are expected to grow by 5-6% in revenue for FY27.
How will AI impact the IT services sector?
AI could reduce the value of IT services by 8-10% over the next few years, but higher project volumes may offset this impact.
What role does the US economy play in this growth?
A strong US macroeconomic backdrop is expected to boost corporate confidence and increase technology spending, benefiting Indian IT firms.
What are the implications for major IT companies like TCS?
TCS has announced wage revisions for a significant portion of its workforce while also planning staff reductions, indicating strategic adjustments in response to market conditions.
