---
title: "Indian IT services industry to see 4-6% revenue growth in FY26: Icra"
description: "India's IT services industry is projected to grow by 4-6% in FY26, according to Icra. This moderate growth is influenced by global economic challenges and policy uncertainties in major markets. The BF"
type: "news"
locale: "en"
url: "https://longbridge.com/en/news/231536452.md"
published_at: "2025-03-12T12:25:40.000Z"
---

# Indian IT services industry to see 4-6% revenue growth in FY26: Icra

> India's IT services industry is projected to grow by 4-6% in FY26, according to Icra. This moderate growth is influenced by global economic challenges and policy uncertainties in major markets. The BFSI, retail, and healthcare sectors are experiencing increased IT spending, particularly in AI technologies. Employee attrition rates have decreased significantly, stabilizing around 12-13%. Operating profit margins are expected to remain steady at 22.5-23.0% due to cost optimization efforts. Overall, while growth is subdued, there are positive signs in specific sectors and revenue visibility remains strong.

India’s IT services industry is expected to witness moderate revenue growth of 4-6 per cent in financial year 2025-26 (FY26), according to a report released by Icra on Wednesday. The rating agency’s projections are based on a sample set of companies that account for approximately 60 per cent of the industry’s revenue.

While the sector has seen gradual recovery over the past three quarters, growth is expected to remain subdued in the near term due to global economic headwinds and policy uncertainties in key markets such as the United States and Europe, Icra said.

## Global trade dampening IT sector growth

According to Deepak Jotwani, Vice President & Sector Head at ICRA, the uncertain global trade environment—particularly potential US trade tariffs—and macroeconomic pressures are dampening growth prospects.

"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 monitorables,” Jotwani said.

## BFSI, retail, healthcare see growth

The report did note that the industry is slowly recovering, with companies reporting a year-on-year revenue growth of 3.6 per cent in USD terms in the first nine months of FY25.

The banking, financial services, and insurance (BFSI) sector, along with retail and healthcare, has seen an uptick in discretionary IT spending, contributing to new order inflows. Additionally, investments in Generative AI (GenAI) technologies are beginning to translate into fresh business opportunities for Indian IT firms.

Indian IT firms have made significant investments in GenAI, training a large portion of their workforce in AI-driven capabilities. This has led to a rise in AI-related deals, particularly in BFSI and healthcare, which have been early adopters of AI-driven solutions.

Jotwani noted that while deal cycles have lengthened, overall contract wins remain strong, ensuring revenue visibility for the medium term.

## Attrition rates in IT sector drop

One notable trend in the sector is the sharp decline in employee attrition rates, which had previously been a concern. Attrition levels dropped to 12.8 per cent in Q3FY25 from 22.3 per cent in Q3FY23.

Icra expects attrition to stabilise at around 12-13 per cent in the near term.

Hiring activity is likely to remain subdued until growth momentum picks up towards the end of FY26, the report added.

IT firms are prioritising cost efficiency and productivity through AI-driven solutions, reducing the need for large-scale recruitment.

## Operating margins to remain steady

Despite revenue pressures, operating profit margins (OPM) are expected to remain stable at 22.5-23.0 per cent over the next three to four quarters. This is largely due to optimisation efforts, including moderation in wage hikes, higher employee utilisation, and cost control measures. Employee costs, as a percentage of operating income, dropped slightly to 56.2 per cent in Q3FY25 from 57.0 per cent a year earlier.

### Related Stocks

- [AI.US - C3.AI](https://longbridge.com/en/quote/AI.US.md)

## Related News & Research

| Title | Description | URL |
|-------|-------------|-----|
| Artificial Intelligence Technology Solutions Inc Announces Year-End Video Message | Artificial Intelligence Technology Solutions Inc. announced a year-end video message from CEO Steve Reinharz, set to rel | [Link](https://longbridge.com/en/news/271326853.md) |
| C3.ai Stock Surges Nearly 16% In Wednesday Pre-Market: What's Going On? | C3.ai Inc. (NYSE: AI) stock surged 15.87% in pre-market trading on Wednesday amid reports of a potential merger with Aut | [Link](https://longbridge.com/en/news/273982861.md) |
| New York is losing high-income earners to Texas—here’s why | The Lone Star State overtook New York in 2024 as the top employer of financial services workers, new research shows. | [Link](https://longbridge.com/en/news/276296150.md) |
| EXCLUSIVE RESEARCH: How AI is supporting bank mortgage growth plans | A recent survey indicates that banks and credit unions are optimistic about mortgage growth, with over 75% expecting inc | [Link](https://longbridge.com/en/news/276246947.md) |
| Japan Manufacturing PMI Hits Near 4-Year High | The S&P Global Japan Manufacturing PMI increased to 52.8 in February 2026, the highest since May 2022, driven by strong  | [Link](https://longbridge.com/en/news/276398113.md) |

---

> **Disclaimer**: This article is for reference only and does not constitute any investment advice.
