IT Sector To See Low Hiring Amid Higher Investment In GenAI, Expects Moderate Revenue Growth, Says ICRA
The attrition level for the IT sector is also expected to stabilise near the long-term average of 12-13% over the near term.
(Stock representational image Source: Freepik)
Hiring in the information technology sector is expected to be low until a surge in the growth momentum by the end of fiscal 2026, according to an ICRA report. This might lead to 4-6% moderate revenue growth for the sector.
Lower hiring in the sector can be attributed to higher investments in GenAI and the expected benefits from the same, including increasing productivity and cost savings.
Major IT firms have enhanced their service offerings to provide GenAI-based solutions to their clients by training a sizeable portion of their employee base in GenAI skills, the report asserted.
“This has started to show results as the inflow of GenAI-related deals for major industry players has risen in recent quarters and is expected to pick up materially over the medium term, as overall technology adoption is more pervasive, according to Deepak Jotwani, vice president and sector head at ICRA.
The healthcare and BFSI sectors remain the early adopters of AI/GenAI capabilities and continue to invest in the same, he said.
The attrition level for the sector is also expected to stabilise near the long-term average of 12-13% over the near term.
According to the report, the employee costs, as a percentage of operating income, dropped slightly to 56.2% in the third quarter of fiscal 2025 from 57.0% in the year-ago period because wage hikes were more moderate this year.
The operating profit margin was around 22.5-23.0% due to better employee usage and cost structure optimisation in the recent quarter. This trend is expected to continue in fiscal 2026, the report said.
The companies in the sample set are Birlasoft, Coforge, Cyient, HCL Technologies, Infosys, LTIMindtree, L&T Technology Services, Mastek, Mphasis, Oracle Financial Services Software, Persistent Systems, Tata Consultancy Services, Tech Mahindra, Wipro, and Zensar Technologies.
