India IT sector nearing FY27 revival; AI ramp-up to be key, says Nomura
- IBEF
- December 1, 2025
Nomura indicates that India’s information technology services sector may be approaching a gradual recovery after two years of muted performance, supported by easing macro headwinds and a clearer monetisation trajectory for artificial intelligence (AI)-led services. Industry revenue growth remained subdued at 1.80% in FY25 and is expected to reach 2.90% in FY26. However, Nomura projects an improvement to 4.50% by FY27 for large-cap companies. It notes that every major technology transition has historically expanded the addressable market for IT service providers, with system integrators continuing to play a vital role as enterprises adopt more complex AI-driven digital architectures. Early-stage AI deflation, cautious client spending, and delayed project decisions remain key drags in the near term.
Nomura expects a more meaningful upturn as AI adoption moves beyond pilot phases into scaled implementations over the next 12 to 18 months, which should also revive demand for cloud and data modernisation services. Profitability is projected to improve modestly, with large-cap Earnings Before Interest and Taxes (EBIT) margins expanding by 30 basis points and mid-cap margins by 50 basis points in FY27, supported by workforce optimisation. While valuations remain attractive, Nomura stresses selective stock picking, highlighting Infosys and Cognizant among large caps, Coforge among mid-caps, and eClerx among small caps, alongside a contrarian Buy on Wipro.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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