India IT Sector Revenue Growth Projected at Stable 6% Through FY27, Says Brickwork Ratings

India’s IT sector is undergoing a structural shift from traditional volume-based contracts to high-value digital services, supported by hyper-automation and artificial intelligence, according to a report by Brickwork Ratings. The sector recorded $418 billion in services exports in FY26, with revenue growth estimated at 6.1 percent for FY26 and projected at 6.0 percent through FY27.

Early results for Q1 FY27 from the sector’s largest firms indicate a soft start. Major tier-1 firms posted modest low-single-digit growth in constant currency terms, though reported revenues appeared higher due to currency depreciation. Operating margins faced pressure during this period, driven by annual wage hikes and ongoing investments in AI talent. Operating margins across the sector are estimated to have moderated to 20.1 percent in FY25 as companies absorbed these specialized labor costs.

Despite tier-1 headwinds, mid-sized firms fared somewhat better on growth, aided by steady deal wins and rising AI-led revenue that helped keep the sector’s medium-term outlook intact. Brickwork Ratings maintains a stable credit outlook for the industry, underpinned by steady technology exports, AI adoption, and favorable policy measures.

The ratings agency noted that India’s position as second globally in AI skill development, alongside the India AI Mission's deployment of more than 38,000 GPUs, is facilitating the sector’s operational transition. Additionally, more than 1,700 Global Capability Centres (GCCs) are leveraging domestic data-centre capacity, which is expanding at over 20 percent annually. The sector also benefits from a 15.5 percent common safe harbour margin for consolidated IT categories introduced in the Union Budget for FY2026-27.

Geographical concentration remains a structural consideration, with the US and Europe accounting for 52.9 percent and 32.8 percent of IT spending respectively in FY25. Furthermore, rapid advancements in artificial intelligence necessitate continuous investments in workforce skills to mitigate risks related to skill obsolescence. As digital investments mature and automation improves overall efficiency, operating margins are projected to recover to 21.8 percent by FY27.

"The transition of India's IT sector toward high-value digital services and AI-driven solutions is a necessary evolution. While short-term margins face pressure from talent investments and wage hikes, the medium-term outlook remains resilient. Mid-sized firms are demonstrating agility through steady deal wins, while infrastructure support like GCC expansion and data-centre growth provide a solid foundation. IT enterprises must continue balancing cost management with continuous upskilling to navigate geographical concentration risks and sustain long-term growth through FY27." — Dr. Shishir Gupta, Founder & CEO, StartupLanes