The financial year 2025-2026 is expected to be a tough one for large Indian IT services firms. Many of them may end up having a muted revenue ranging from 3-5 per cent this year due to uncertain market conditions, slow deal momentum and the cautious approach being followed by many of their clients in the US and the European markets that form the chunk of their revenues.
The US accounted for 57 per cent of the $193 billion revenues of Indian IT services companies in fiscal 2024. The mid-sized firms have been working on cutting-edge technologies and are able to provide whole lot of new value-added services to their potential clients abroad.
Large firms have also been affected by a cautious approach by many firms who are delaying their deals due to the uncertainty surrounding them. They are mainly going for only operational efficiency and cost optimisation deals where they need IT firms to help them get more out of their existing technology resources. By bringing in more innovation the mid-sized IT firms are better positioned to clinch such deals compared to the large firms.
Experts point out that global tariff and trade uncertainty worries have led to spend control and spend deferment decisions across companies. “As a major IT services vendor India, particularly the large companies are hit the most owing to these and hence the consequential muted financial results. In addition the shrinking or stagnant economies across EU have added to the woes without any visibility on revival of economic growth among developed economies. Also, AI and its impact on software development is still a mystery to be uncovered and is likely to worsen the sector and its margin levels in India. We need the clouds to pass in year 2025 for possible revival,” remarked Subramanyam Sreenivasaiah, the Chief Executive Officer (CEO) of Ascent HR.
Interestingly the growth trajectory of mid-sized IT services firms this year highlights a fundamental shift in the industry. Earlier there were only a few large IT services firms but now scores of firms have mushroomed each coming out with their unique offerings. “Their agility, ability to pivot quickly, and sharper focus on innovation, especially in AI and automation, have made them highly responsive to evolving client demands. Unlike larger firms, which often face structural inertia, mid-sized players can seamlessly deliver smaller, high-impact projects and experiment with new models of value creation. The rise of bold, future-focused leadership in these firms is further fueling this momentum,” remarked Aditya Narayan Mishra, MD and CEO of CIEL HR.
