Indian IT sector revenue growth steady at 6% in FY27: Brickwork Ratings
Synopsis
India's IT sector is on course for a second consecutive year of 6% revenue growth, but the real story is structural: Brickwork Ratings says the industry is shifting from volume contracts to AI-led, high-value digital services — backed by 38,000 GPUs, 1,700-plus GCCs, and a new safe harbour tax margin. The transition is real, but so is the skill-obsolescence risk it creates.
Key Takeaways
India's IT sector is projected to grow revenue at 6 per cent in FY27 , matching the estimated 6.1 per cent in FY26, per Brickwork Ratings .
The sector recorded $418 billion in services exports in FY26 .
Operating margins are forecast to recover to 21.8 per cent in FY27, with debt-to-equity falling to 0.1 .
More than 1,700 GCCs are expanding domestic data-centre capacity at over 20 per cent annually .
The US and Europe together accounted for 85.7 per cent of IT spending in FY25, posing a geographical concentration risk.
The Union Budget 2026-27 introduced a 15.5 per cent safe harbour margin for consolidated IT categories, providing additional policy support.
India's IT sector is projected to sustain revenue growth of 6 per cent in FY27, underpinned by resilient technology exports, accelerating AI adoption, and supportive government policy, according to a report released by Brickwork Ratings on Wednesday, 26 August. The findings signal a sector in transition — moving away from volume-driven contracts toward higher-value digital engagements.
Key Financial Projections
Operating margins are forecast to recover to 21.8 per cent in FY27, while the debt-to-equity ratio is expected to ease to 0.1 and debt service coverage to rise to 16.8. The credit outlook for the sector remains stable, according to the ratings agency. Revenue growth is estimated at 6.1 per cent in FY26 — when the sector recorded $418 billion in services exports — before moderating marginally to 6.0 per cent in FY27.
AI and GCC Expansion Drive Structural Shift
Brickwork Ratings characterises the ongoing change as a structural shift from volume-based contracts to high-value digital services, driven by hyper-automation and artificial intelligence. India's standing as the world's second-largest nation for AI skill development, combined with the India AI Mission's deployment of more than 38,000 GPUs, is actively supporting this transition.
More than 1,700 Global Capability Centres (GCCs) are leveraging domestic data-centre capacity and expanding at over 20 per cent annually. The sector also benefits from a 15.5 per cent common safe harbour margin for consolidated IT categories, introduced in the Union Budget 2026-27. Rajeev Sharan, Head of Research at Brickwork Ratings, noted that this combination of infrastructure and policy support is reinforcing the sector's medium-term trajectory.
Q1 FY27 Performance: Tier-1 vs Mid-Sized Firms
Early results from the sector's largest firms present a mixed but broadly stable picture. Tier-1 companies posted modest low-single-digit growth in constant currency terms, though rupee-denominated revenues appeared higher due to currency depreciation. Margins came under pressure from annual wage hikes and continued investment in AI talent.
Mid-sized firms fared somewhat better on growth, with steady deal wins and rising AI-led revenue helping sustain the sector's medium-term outlook. Sharan noted that rapid AI adoption simultaneously creates a risk of skill obsolescence, requiring continuous workforce reskilling investment.
Geographical Concentration Risk
A key vulnerability flagged in the report is geographical concentration. The United States and Europe accounted for 52.9 per cent and 32.8 per cent, respectively, of IT spending in FY25 — meaning any demand slowdown in either market carries an outsized impact on Indian IT revenues. This comes amid ongoing uncertainty around US discretionary technology spending, which has already weighed on large-cap IT valuations in recent quarters.
Outlook
With AI-linked deal pipelines building and GCC expansion continuing at pace, the sector's medium-term fundamentals appear intact. However, the dual pressure of wage inflation and skill-upgrade costs means margin recovery will depend on how efficiently firms can monetise their AI investments. Analysts and industry observers will closely track Q2 FY27 results for confirmation that the projected recovery in operating margins is materialising on schedule.
Point of View
000 GPUs, 1,700-plus GCCs, a new safe harbour margin) but margin pressure from wage hikes and AI talent costs means the payoff is not yet visible on the bottom line. The deeper concern is geographical: with the US and Europe commanding over 85% of IT spending, any demand softness in either market can unwind a year's worth of deal wins. The sector's AI pivot is real, but so is its exposure to geographies it cannot control.
NationPress
26 Aug 2026
Frequently Asked Questions
What is the revenue growth forecast for India's IT sector in FY27?
India's IT sector is projected to grow at 6 per cent in FY27, according to a Brickwork Ratings report released on 26 August . This follows an estimated growth of 6.1 per cent in FY26, when services exports reached $418 billion.
Why are IT sector operating margins expected to improve in FY27?
Operating margins are forecast to recover to 21.8 per cent in FY27 as firms increasingly monetise AI-led services and benefit from a new 15.5 per cent safe harbour margin introduced in the Union Budget 2026-27. However, wage hike cycles and AI talent investment continue to exert near-term pressure.
How is AI adoption affecting Indian IT companies?
AI is driving a structural shift from volume-based contracts to high-value digital services, according to Brickwork Ratings. The India AI Mission has deployed more than 38,000 GPUs , and India ranks second globally in AI skill development, supporting this transition — though continuous reskilling investment is required to avoid skill obsolescence.
What is the geographical concentration risk facing Indian IT?
The United States and Europe together accounted for 85.7 per cent of IT spending in FY25 — 52.9% and 32.8% respectively. This heavy dependence means any slowdown in US discretionary technology spending or European demand directly impacts Indian IT revenues and deal pipelines.
How are mid-sized IT firms performing compared to tier-1 companies in FY27?
Mid-sized IT firms are faring somewhat better on growth in early FY27, supported by steady deal wins and rising AI-led revenue. Tier-1 firms posted modest low-single-digit growth in constant currency terms, with margins under pressure from annual wage hikes and AI talent investment costs.
