India’s IT sector is set for a steady but ordinary Q4FY26, with analysts pointing to selective demand, healthy deal pipelines, and early AI-led opportunities supporting modest growth, even as elongated decision cycles and weak discretionary spending cap upside. Growth expectations remain modest, with mid-single-digit expansion reflecting a steady recovery.
Harshal Dasani, the business Head at INVasset PMS, noted that in Q4FY26, demand appears stable but not broad-based. However, large deal pipelines remain healthy, led by cost optimisation, vendor consolidation, and cloud transformation, while early traction in AI-led projects is beginning to add a new layer of opportunity.
“Q4FY26 translates into a quarter of measured execution rather than a breakout. Discretionary spending is returning, but unevenly, and decision cycles are elongated, particularly in verticals like BFSI and retail. Sequential growth is likely to stay modest, with revenues supported more by deal ramp-ups than fresh spending. Margins could see some stability from lower attrition and controlled costs, though pricing pressure and transition costs may cap upside,” he shared.
Tier-1 companies have indicated strong deal bookings in the recent quarters, suggesting that the underlying demand engine is intact even if revenue conversion is gradual. A BNP Paribas report noted that deal signings reached a five-month high of 14 in February, up from 12 in January, after steadily declining from 18 in September to 10 in December.
Tushar Badjate, Director of Badjate Stock Shares, explained that Indian IT closed Q4 in a moderated demand environment, particularly across key global markets that contribute nearly 70% of export demand.
However, enterprise spending remained selective, with budgets largely directed toward maintenance, cloud migration, and AI-led efficiency initiatives, while large-scale transformation programs continued to be deferred or re-scoped. Despite this, the sector demonstrated resilience through steady deal pipelines and sustained digital demand.
Large-caps delivered flat to low single-digit sequential growth, with margins holding in the range of ~18% to 25%, supported by disciplined cost management and improved utilisation. Mid-tier firms, benefiting from niche capabilities and AI integration, relatively outperformed with stronger growth momentum.
“Structurally, this phase reflects a transition toward efficiency-driven spending and tighter capital allocation by global clients. While near-term growth remains calibrated, the shift toward automation, AI adoption, and vendor consolidation is gradually shaping a more stable demand environment,” Badjate noted.
Meanwhile, Pareekh Jain, founder and CEO of EIIR Trend, said the current quarter is expected to be stronger than the last, with optimism supported by Accenture’s results, steady BFSI demand, improving geographies, and accelerating AI momentum. However, he flagged rising concerns for FY27 as the Gulf conflict could drive up oil prices and trigger second-order impacts across sectors, potentially delaying discretionary tech spending and AI investments. While the near-term outlook remains stable, focus will be on management commentary around FY27 budgets, updated guidance, AI scaling, and the evolving impact of the conflict.
A CLSA report, based on discussions with TCS, Infosys, HCLTech, and Wipro, found no signs of increased AI-led deflation in renewal contracts despite new tools from Anthropic and OpenAI. BFSI demand remains strong across firms, while tech is resilient for HCLTech and TCS, and retail, auto, and healthcare remain soft.
Some clients are delaying decisions to assess AI capabilities, and amid West Asia tensions, though direct exposure is limited to low single digits. But historically, even during periods of elevated oil prices, like 2010–14 and 2022, IT spending held up in line with long-term trends despite rising inflation and interest rates, with defensive sectors like telecom and utilities outperforming while financials and consumer lag in EPS growth.
Published on March 29, 2026
