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IT sector shifts focus from AI disruption to sustainable growth as revenue stabilization improves: Report

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IT sector shifts focus from AI disruption to sustainable growth as revenue stabilization improves: Report

Business News Tech AI IT sector shifts focus from AI disruption to sustainable growth as revenue stabilization improves: Report

IT sector shifts focus from AI disruption to sustainable growth as revenue stabilization improves: Report

India's IT services sector is witnessing a shift towards stabilizing revenues and fostering sustainable growth as investor apprehensions begin to diminish. Although demand remains tepid with only modest revenue increases, IT stocks have shown commendable performance. The rise of engineering-led organizations is pivotal for AI integration, allowing firms to sustain profit margins amidst competition, all while investing further in AI technologies.

India's IT services sector is gradually moving beyond concerns over artificial intelligence (AI) disrupting traditional business models, with investors now focusing on revenue stabilization and the ability of companies to deliver sustainable growth , according to a report by Kotak Institutional Equities . The shift in market sentiment comes despite a mixed performance in the second quarter of FY27, with demand remaining subdued and revenue growth among large IT companies staying at low-single-digit levels. The report said results for Tier-1 IT companies were middling, with their year-on-year organic revenue growth declining to low-single-digit levels. Mid-tier companies performed relatively better, although some also missed headline expectations.

However, IT stocks have performed well despite the moderate quarterly results, as the market's discussion around the sector has changed. "The sector discussion has shifted from the relevance of the model to revenue stabilization and now to sustainable growth," the report said. According to Kotak, concerns about the long-term relevance of IT services companies in an AI-driven business environment have eased.


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