Summary:

India's IT services sector is expected to grow at a stable rate of 7-9% in FY26, driven by higher investment in the BFSI sector and generative AI advancements in the United States and Europe. Growth in FY25 is predicted to be slower at 5-7%, compared to a 6% gain in FY24. BFSI accounts for 30% of the sector's revenue, with retail, technology, media, and other industries contributing 10% each. Despite a decline in FY24, BFSI revenue improved by 3% in Q2 FY25.

After a seven-quarter drop, IT companies are ramping up recruitment in response to improving macroeconomic conditions. Attrition is expected to stabilize at 12-13%, while employee utilization remains high at 85%, resulting in projected operating margins of 21-22%. The industry benefits from strong cash generation and balance sheets, ensuring stable credit quality. Companies are actively exploring acquisitions to strengthen their digital capabilities. However, challenges such as competition from global capability centers and delays in economic recovery persist.

Source: IBEF

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