India’s IT sector is likely to see a gradual recovery by FY 2027, driven by improving enterprise tech spending and growing monetization of AI use cases, Business Standard reports, citing research by Nomura, the Tokyo-based financial services giant. The firm expects aggregate revenue growth of around 2.9% in FY 2026 and 4.5% in FY 2027 for the large-cap IT firms under its coverage.

(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)

Nomura expects operating margins to expand by 30 basis points (bps) for large caps and 50 bps for mid-caps as growth improves in 2026-27. Mid-cap IT firms have outperformed large caps over the past two years and are expected to maintain stronger growth momentum into FY 2027.

AI monetization: The sector’s slowdown is driven by soft discretionary spending, delayed transformation programs, and pricing pressure from early-stage AI deflation. Nomura expects meaningful revenue monetization from AI within 12-18 months, supported by spending on cloud, data, and workflow modernization.

Valuation view: Revenue patterns projected for 2026 mirror FY 2025, with improvement expected to build into FY 2027 as demand gradually recovers and agreement pipelines strengthen, Nomura said.

IN CONTEXT- India’s digital economy was valued at INR 28.94 tn (USD 368 bn) in 2022-23, about 11.74% of national income, according to a 2025 report by the Electronics and Information Technology Ministry. A forecast by Gartner sees India’s total IT spending reaching INR 14.28 tn (USD 160 bn) this year, driven by expanding investments in software, cloud, data, and gen-AI technologies.

Tags: