Brokerage firm Anand Rathi expects a multi-year growth phase for Indian IT services beginning in fiscal year 2027 as global clients shift focus from building AI capacity to generating tangible financial returns. While leaders like TCS and Infosys are already reporting AI-linked revenue, the sector faces near-term risks including geopolitical uncertainty and margin volatility.
The Indian information technology sector is preparing for a transition in its growth trajectory, with brokerage firm Anand Rathi forecasting a multi-year cycle of expansion beginning in fiscal year 2027. This shift is driven by a fundamental change in how global corporations approach artificial intelligence. After several years of aggressive investment in AI infrastructure, clients are now prioritizing measurable financial payback over experimental spending, which is creating a new demand pipeline for specialized service providers.
Moving From Capacity to ROI
For the past few years, global corporations poured billions of dollars into AI infrastructure. As this phase matures, enterprise boards and financial officers are shifting their focus to practical, scaled deployment of AI solutions. This transition directly benefits Indian IT firms, which are well-positioned to assist with complex system integration, data governance, and cybersecurity upgrades. The brokerage notes that contrary to fears of automation replacing services, these technological requirements are actually expanding the total addressable market for IT vendors.
Major domestic companies have already begun to reflect this shift in their disclosures. Tata Consultancy Services has reported an annualized revenue stream of $2.6 billion from AI-related work, while Infosys has indicated that approximately 8.2 percent of its total revenue is tied to such services. Other prominent players like HCL Technologies and LTIMindtree are also scaling their specialized offerings to capture this emerging demand.
Navigating Near-Term Risks
Despite the positive long-term outlook, the road to FY27 involves several challenges that investors should consider. The sector is currently facing headwinds that could pressure performance in the near term. Geopolitical tensions remain a significant concern, as they often lead to delays in discretionary technology spending. Furthermore, the industry is grappling with AI-led deflation, where technology automates tasks and potentially reduces the pricing power of traditional service contracts.
Margin compression is another area of focus. Companies are dealing with the costs of proactive hiring and the friction of transitioning from legacy work to higher-value, AI-centric projects. Mid-cap IT companies, in particular, may see muted revenue growth in FY27 if hyperscalers—the large cloud infrastructure providers—prioritize cost-saving measures over new project deployments. Success in this environment will depend on the ability of firms to migrate their talent pools quickly and execute on these high-value engagements without significantly eroding their operating margins.
Investors looking at the sector may want to monitor how efficiently IT firms manage this transition. Key indicators to track include the sustainability of AI-linked revenue, the ability of companies to maintain profit margins during the migration of work models, and whether global client spending patterns shift back toward discretionary projects as economic conditions stabilize.