BENGALURU: Small Indian IT services firms are increasingly diverging in performance, as weak deal momentum and sharper competition reshape growth patterns across the sub-$1 billion revenue cohort.
Within the segment, revenue growth slowed in fiscal year 2026 (FY26) compared with the previous year, underscoring a widening gap between outperformers and laggards even as one company entered the $100 million revenue club.
Save for Sasken Technologies Ltd, which doubled its revenue last fiscal on the back of its largest acquisition, Birlasoft Ltd reported its second straight year of revenue decline. Mastek Ltd and Zensar Technologies Ltd grew at 3.1% each in FY26, slower than the 10.9% and 5.4% growth, respectively, in the preceding fiscal year.
Cyient DET returned to growth, reporting a 0.8% year-on-year rise in revenue, aided by the restatement of revenue figures for the past two years to exclude its semiconductors business.
The divergence reflects intensifying competition among smaller IT firms as they defend market share against larger peers, while also adjusting to rapid artificial intelligence (AI)-driven shifts in demand and client priorities.
The pecking order
At the same time, the ranking within the segment is shifting. CK Birla-owned Birlasoft Ltd ended FY26 with $597.5 million in revenue, down 6% year-on-year. This pushed Zensar Technologies Ltd ahead of Birlasoft as the fifteenth-largest IT services company.
Most of Birlasoft’s decline came from manufacturing clients, which account for a little more than a third of its business. The drop marked its worst year in six years.
“I would like to point out that our performance during the quarter and year under review reflects a very soft demand environment due to sustained macroeconomic headwinds leading to some client-specific issues and as a result, erosion of revenue,” said Angan Guha, chief executive of Birlasoft Ltd, during the company’s post-earnings conference call on 6 May.
The muted performance was attributed to slower deal wins, weighing on the company’s outlook.
“A key challenge for BSOFT (Birlasoft) has been sluggish deal wins in FY25 and FY26, accentuating the impact of weak demand (on macro uncertainty) on revenue growth. BSOFT’s efforts to revamp its sales team and focus on mining efforts in its large accounts to secure growth will take time to yield result, in our view,” Nomura analysts Abhishek Bhandari and Karan Nain said in a 6 May note.
Birlasoft reported deal wins worth $658 million in FY26, down 13.2% on year.
A second brokerage expressed a similar view.
"Revenue performance reflected challenging demand conditions, account specific issues, productivity pass-through obligations linked to AI deals and deliberate exit from non-profitable revenue streams," said Bank of Baroda Capital Markets analysts Girish Pai and Lopa Notaria, in a note dated 7 May.
In contrast, RPG-owned Zensar Technologies Ltd gained ground, with revenue rising 3.1% to $643.7 million in FY26. Banks accounted for nearly half its business and drove much of the growth.
Its order book also strengthened. The company won its largest IT transformation deal worth $210 million from a financial institution, pushing order inflows to an all-time high in the January-March period.
This has also raised competitive stakes. “Revenue ramp from large deals is phased (limited in 1Q, gradual in 2Q, meaningful from 3Q), and competitive intensity has increased with Tier-1 vendors participating more actively in similar deal sizes. Sustaining win rates and deal economics in a competitive environment will be key monitorables,” said Motilal Oswal Financial Services analysts Abhishek Pathak and Keval Bhagat, in a note dated 25 April.
Zensar ended the last fiscal year with orders worth $912.7 million, up 17.8% year-on-year. Even so, it now faces competition from a smaller peer that has entered the $100 million revenue club.
Sasken’s revenue almost doubled to $125.5 million, pushing it into the $100 million-plus bracket ahead of Nucleus Software Exports Ltd, which reported about $88 million in revenue last year. Happiest Minds Technologies Ltd is yet to announce its FY26 results.
Nearly a third of Sasken’s incremental revenue came from its largest acquisition of California-based IT firm Borqs International, completed in April 2025. The deal also helped it build a new software products unit under its ‘product solution’ segment.
“Another factor (to Sasken’s growth) is that engineering-focused firms like Sasken are often closer to the product roadmap of clients, not just maintaining enterprise back-office systems. That positions them better when clients prioritize innovation budgets over discretionary transformation programs. In many cases, enterprises may delay a large ERP (enterprise resource planning) modernization project, but they cannot afford to pause investment in intelligent products, connected platforms, automotive systems, or telecom network evolution,” said Phil Fersht, chief executive of HFS Research.
Sector slowdown
The slowdown in small caps mirrors broader weakness across India’s IT services sector. Mid-sized firms also grew more slowly than the previous year amid demand uncertainty linked to geopolitical tensions and the rising impact of automation tools.
Mid-cap IT companies grew 5-30% last year, compared with up to 32% growth in FY25. Large IT firms grew 1-6%, compared with a maximum of 4.3% in the preceding fiscal year.
To be sure, the industry spans multiple revenue tiers, including six IT services companies earning $4-30 billion, seven in the $1-2 billion range, and seven between $50 million and $1 billion. Engineering, research and development firms such as KPIT Technologies, Tata Technologies, and Tata Elxsi are excluded from this classification.
The rise of automation tools has prompted investors to question the relevance of IT outsourcers. While shares of mid-sized IT firms fell between 14–36% since the start of the year, those of smaller firms fell between 17-27% over the same period. However, Sasken was an outlier, as its shares rose about 8% since the start of the calendar year.
While mid-caps remain the fastest-growing segment, smaller firms are increasingly under pressure. “Clients increasingly want partners who can combine engineering depth with governance, cybersecurity, compliance, global delivery, and large-scale integration capability. That is where mid-caps and larger firms still hold an advantage,” said Fersht.