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AI deals seen driving medium-term growth as Indian IT sector faces muted Q2: Report

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AI deals seen driving medium-term growth as Indian IT sector faces muted Q2: Report

Business News Tech IT AI deals seen driving medium-term growth as Indian IT sector faces muted Q2: Report

AI deals seen driving medium-term growth as Indian IT sector faces muted Q2: Report

India's IT services sector is likely to see muted performance in the second quarter of FY27, but increasing traction in artificial intelligence-related deals could support growth over the medium term, Centrum said in a report.

India's IT services sector is likely to see muted performance in the second quarter of FY27, but increasing traction in artificial intelligence-related deals could support growth over the medium term, Centrum said in a report. The report said the demand environment has remained broadly unchanged over the past three months, with clients cautious about AI adoption and longer decision-making timelines weighing on near-term growth. At the same time, the brokerage expects deal booking to remain healthy, with a strong pipeline across most IT services companies. "AI led deals to be significant drivers of incremental business growth in the medium term," the report said, pointing to the potential for the ongoing AI technology cycle to create new opportunities for Indian IT services companies. It expects the AI-led services market to reach USD 300-400 billion by 2030.

However, the brokerage expects revenue growth across Tier 1 IT companies to remain subdued in the near term. 3 per cent for Tech Mahindra in Q2FY27. 3 per cent sequentially in US dollar terms. Further, Centrum said recently signed deals are largely focused on cost optimisation and vendor consolidation, while the conversion of total contract value into revenue remains soft, indicating that deals are ramping up gradually.


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