IT companies to see revenue growth of 4-6% in FY26; hiring to remain subdued: Icra
Credit rating agency Icra has said that the Indian IT companies are expected to see moderate revenue growth of 4-6% in FY26, with hiring likely to remain subdued until growth accelerates towards the end of the fiscal year. The agency projected attrition level to average 12-13% over the near term. During first nine months of FY2025, Icra’s sample set of Indian IT services companies which account for 60% of the industry in revenue terms has exhibited 3.6% year-on-year revenue growth in US dollar terms. As per Icra, the growth was part of a gradual recovery over the past three quarters, aided by a lower base from FY2024. Moreover, the slight rise in discretionary spending by customers in the BFSI and retail sectors in certain markets, along with investments in Generative AI initiatives contributed to new orders.
Icra expects the growth momentum for its sample set of IT services companies to remain muted over the near term, owing to the looming uncertainty related to the imposition of the US trade tariffs and macroeconomic headwinds across the key markets of the US and Europe. It added that the policy changes by the US government for key sectors catered to by Indian IT services companies as well as future interest rate trajectory will remain the key factors to be monitored. It also added that the IT industry experienced relief due to reduced attrition rates and wage cost inflation, which were significant concerns during FY2023 and the first half of FY2024 and it expects hiring to remain low in the near term until the growth momentum picks up by the end of FY2026. It suggested that the lower hiring activity can also be correlated with higher investments by the industry in GenAI and the expected benefits in terms of increased productivity and cost savings.
While explaining about the developments regarding Generative AI in IT industry, Icra has said that major Indian IT services companies have trained a significant number of their employees in Generative AI skills and are now expanding their capabilities and service offerings to provide GenAI-based solutions to their clients. Furthermore, this started to show results as the inflow of GenAI-related deals for major industry players has risen in recent quarters and is expected to pick up materially over the medium term, as overall technology adoption is more pervasive. The healthcare and BFSI sectors remain the early adopters of AI/GenAI capabilities and continue to invest in the same.
