Business News | IT Sector Sees Early Signs of Demand Stabilisation but Visibility into CY26 Remains Poor: Goldman Sachs
Get latest articles and stories on Business at LatestLY. The information technology (IT) services sector in India is showing tentative signs of demand stabilisation, even as visibility into calendar year 2026 remains weak, noted in a report on India's IT services by Goldman Sachs.
New Delhi [India], October 20 (ANI): The information technology (IT) services sector in India is showing tentative signs of demand stabilisation, even as visibility into calendar year 2026 remains weak, noted in a report on India's IT services by Goldman Sachs.
"While there are early signs of demand stabilisation, visibility into CY26 remains poor, and company commentary suggests AI-related productivity pass-throughs may be becoming more mainstream, which may keep multiples depressed" said the report
The report says that, according to the latest quarterly analyses, all major IT firms reported sequential revenue growth, with the sector expanding 1.5 per cent quarter-on-quarter. Growth trends and deal activity suggest that the December 2025 quarter could see a continuation of this positive momentum, with an estimated 1.7 per cent sequential rise in services revenue.
For the full financial year 2026, the sector's revenue growth is expected to remain muted at around 1.1 per cent year-on-year, improving to about 5.4 per cent in FY27. The report attribute the sluggish outlook to cautious client spending amid macroeconomic uncertainties and the ongoing impact of artificial intelligence (AI)-driven productivity gains, which are beginning to compress traditional growth avenues.
"However, our full year FY26 growth estimate of +1.1 per cent YoY (+10 bps vs earlier) and FY27 estimate of +5.4 per cent YoY (-10 bps vs earlier) are largely unchanged." said the report
Operating margins improved across most players in the second quarter of FY26, aided by currency tailwinds and internal efficiency programs. Headcount additions turned positive after several quarters of decline, signalling early signs of recovery in hiring, "Headcount trends in 2Q were better than 1Q for most" noted the report
Large deal activity remained strong during the September quarter, with total contract values indicating renewed client confidence in long-term digital and efficiency programs. However, the pricing environment continues to be competitive, and project ramp-ups are proceeding at a measured pace. The sector's revenue guidance for the coming quarters implies a moderate 0.5-2.5 per cent sequential growth trajectory, reflecting a cautiously optimistic tone.
While the sector's fundamentals remain intact, the report caution that the medium-term recovery will depend on a revival in global discretionary IT spending and how quickly AI-led productivity benefits stabilise. Growth in FY27 is expected to improve to mid-single digits, supported by sustained deal pipelines, margin efficiency, and potential rebound in key verticals such as financial services, healthcare, and manufacturing.
However, despite these green shoots, the industry continues to grapple with subdued demand visibility, client budget rationalisation, and a shift in technology spending priorities. As a result, most forecasts remain conservative, with expectations that meaningful acceleration in demand could emerge only beyond the next fiscal year. (ANI)
(The above story is verified and authored by ANI staff, ANI is South Asia's leading multimedia news agency with over 100 bureaus in India, South Asia and across the globe. ANI brings the latest news on Politics and Current Affairs in India & around the World, Sports, Health, Fitness, Entertainment, & News. The views appearing in the above post do not reflect the opinions of LatestLY)