IT sector to improve in H2 on AI-led projects, better client engagement: Report
The Indian information technology (IT) sector is expected to register improved second half of the current financial year, supported by AI-led projects, better client engagement, and an uptick in discretionary spending, according to a report by Centrum Research.
The report highlighted that improved conversion and deal ramps are likely to drive growth in the second half of FY26 (H2FY26). Business momentum is expected to improve progressively through the second half of FY26, driven by the ramp-up of large client engagements and rising demand for AI-first services.
It stated “commentary points to a gradual recovery into H2FY26, anchored in AI-led projects, improved client engagement, and improvement in discretionary spending patterns”.
Among key sectors, banking, financial services, and insurance (BFSI) are expected to lead the recovery, supported by a strong deal pipeline and scalable modernisation programs.
However, the retail and automotive segments are likely to remain under pressure due to external policy factors and weak discretionary spending. On the other hand, technology and healthcare verticals showed selective strength, supported by digital programs and infrastructure upgrades.
The report noted that the overall appetite of clients for transformation remains strong, with investments in cloud, data, and AI driving medium-term demand recovery and ensuring sustainable growth in IT services.
The Q2FY26 performance of IT companies reflected a stable but cautious business environment, with modest sequential growth and a selective recovery in key verticals.
Although revenue momentum remained limited, deal activity was healthy as enterprises continued to focus on digital transformation, AI adoption, and improving operational efficiency.
Margins across the sector remained steady, supported by disciplined execution even as companies managed wage hikes and localised restructuring. Client decision-making cycles were slightly elongated, but large deal signings and steady pipeline conversion pointed to sustained strategic demand.
Workforce management also remained stable, with low attrition levels and hiring strategies aligned closely with deal visibility. IT firms continued to emphasise cost control, automation, and optimising employee structures to protect profitability.
Overall, the report concluded that commentary from the sector indicates a gradual recovery in H2FY26, led by AI-driven projects, improved client interactions, and better discretionary spending patterns.
Published on November 10, 2025
