India's information technology services industry is confronting a prolonged period of stagnation, as artificial intelligence-driven disruption and global uncertainties continue to weigh on enterprise technology spending, according to a JPMorgan research report.
The brokerage said the IT services sector has been struggling with subdued momentum, with revenue growth remaining around 2-3% over the past three years.
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JPMorgan warned that the ongoing impact of AI adoption, coupled with cautious client spending, could create further challenges for the industry over the next two years, according to the report cited by Moneycontrol.
The report highlighted that companies are reassessing technology budgets amid rapid changes in the AI landscape and geopolitical uncertainty. According to JPMorgan, spending on AI platforms, cloud infrastructure and emerging technologies is increasingly competing with traditional technology service budgets, affecting demand for conventional IT outsourcing services.
The brokerage said the sector is currently in the early “deflation” stage of AI adoption, where productivity gains from automation and artificial intelligence in legacy services are yet to be fully replaced by new AI-driven business opportunities.
JPMorgan has lowered its long-term growth outlook for large Indian IT firms, saying they are unlikely to return to their earlier average growth levels of 7-8%.
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Instead, the brokerage expects revenue growth to remain closer to 3-4% in the foreseeable future. It also warned that the recovery cycle could take longer than expected, potentially extending beyond FY29 into FY30, creating an “L-shaped” growth trajectory.
The brokerage has also revised valuation expectations, saying current market valuations reflect concerns over slower structural growth and limited visibility on a near-term recovery.
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