Indian IT service providers could see a 3.0–3.5% decline in revenue over the next two fiscal years, higher than the earlier estimated impact of 2.0–3.0%, as enterprises adopt artificial intelligence tools and automation faster than expected, according to Kotak Institutional Equities.
Despite the near-term challenges, the brokerage maintains that the long-term relevance of the Indian IT industry remains intact. However, the sector is entering a prolonged phase of slower growth and margin pressure, with no meaningful recovery expected until FY2027.
Although global technology spending is increasing, a significant portion of new investments is being directed toward GPU infrastructure, foundation models, and AI software. This shift is reducing the share of spending available for traditional IT services, thereby shrinking opportunities for Indian vendors.
