IT sector revenue growth to remain stable at 6% through FY27: Brickwork Ratings

Mid-sized firms fared somewhat better on growth, with steady deal wins and rising AI-led revenue

India’s IT sector is undergoing a structural shift from volume-based contracts to high-value digital services, driven by hyper-automation and AI, according to Brickwork Ratings. The sector recorded $418 billion in services exports in FY26, while revenue growth is estimated at 6.1 per cent in FY26 and projected at 6.0 per cent in FY27.

Early results for Q1 FY27 from the sector’s largest firms broadly validate this trajectory. India’s IT services sector began FY27 on a soft note. Larger tier-1 firms posted modest low-single-digit growth in constant currency terms, though revenue in rupee terms appeared higher on account of currency depreciation. Meanwhile, 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 helped keep the sector’s medium-term outlook intact.

Brickwork Ratings maintains a stable credit outlook, supported by steady technology exports, AI adoption and policy support, but subject to operational realignment and investment in specialised capabilities basis AI-led developments.

AI skill development

India’s second position globally in AI skill development and India AI Mission’s deployment of more than 38,000 GPUs are supporting the sector’s transition, according to the ratings agency. “More than 1,700 GCCs are leveraging domestic data-centre capacity, expanding at over 20 per cent annually. The sector further benefits from a 15.5 per cent common safe harbour margin for consolidated IT categories introduced in the Union Budget 2026-27,” said Rajeev Sharan, Head of Research, Brickwork Ratings.

Operating margins are estimated to have moderated to 20.1 per cent in FY25 as companies absorb higher costs of specialised AI talent. As digital investments mature and automation improves efficiency, margins are projected to recover to 21.8% in FY27.

The US and Europe accounted for 52.9 per cent and 32.8 per cent of IT spending respectively in FY25, creating geographical concentration risk. “That said, rapid AI adoption also requires continuous investment in skills to address potential skill obsolescence,” said Sharan.

Published on August 26, 2026