Mint Explainer | Where India’s IT services industry could still find growth

Against this backdrop, the Q3 results offer a view of the pressures, priorities and pockets of growth for India’s IT services sector. Mint takes a look:

What do the Q3 results of IT services majors indicate?

The Q3 earnings indicate that pain points persist for IT services companies, which are now staring at a third consecutive year of glacial growth. Revenue growth has slowed, impacted by global macroeconomic headwinds, cautious client spending, and prolonged decision-making cycles.

Tariff-related headwinds in key sectors such as manufacturing, automotive, and retail are adding to the woes. Margins are under pressure due to rising costs and visa challenges, while discretionary IT projects continue to be deferred, as clients wait for policy and business environments to stabilize.

Overall, the quarter signals that the $280 billion industry is not yet out of the woods.

Are there areas that show promise for future growth?

Despite muted topline growth, certain segments offer a ray of hope. Cloud migration, cybersecurity and data analytics saw steady demand, driven by enterprises modernising their digital infrastructure.

A few large deal wins were a bright spot amid uncertainty. For Infosys, the total contract value in Q3 increased to $4.85 billion from $3.1 billion in Q2. Tata Consultancy Services (TCS) Q3 order book, at $9.3 billion, was strong despite a marginal decline from $10 billion in Q2.

Sectors such as healthcare, BFSI and manufacturing showed selective traction, particularly in digital transformation programs. A pivot to AI-led solutions from digital solutions could help the sector regain its mojo.

Will future growth be driven by Global Capability Centers (GCCs)?

On Wednesday, French beauty major L’Oreal announced plans for a ₹3,500 crore GCC in Hyderabad. In an otherwise gloomy IT services environment, GCCs growth has stood out.

According to CII, there are more than 2,000 GCCs employing nearly 2 million. The L’Oreal GCC will serve as the company’s global base for AI-led innovations and digital platforms. For IT firms, GCCs offer opportunities to collaborate, as these captive centres will likely drive the next phase of India’s IT growth story.

Is India’s skilled manpower base an asset in an AI-led world?

Indian IT services companies employ 5.8 million people. India’s deep talent pool remains a critical asset in an AI-driven landscape, but it will change. Many entry-level jobs will be automated as companies rejig work between humans and AI agents.

Companies will need humans to oversee mission-critical software and won’t entirely depend on machines for that. As focus shifts to premium work, companies will continue to flock to India to deliver IT and business services at scale. However, the sector may not be the mass hiring engine it once was.

If code is increasingly written by AI, how will it benefit Indian IT services companies?

Automated code generation platforms, such as Anthropic’s Claude Cowork, are reshaping software development by enabling even non-coders to handle complex tasks. This enhances productivity by reducing time spent on repetitive coding, freeing skilled engineers to focus on higher-value design, architecture and innovation.

It also expands the client base, as enterprises increasingly seek partners who can integrate and govern AI-driven development and workflows. Automation also improves quality by minimising human error and accelerating testing cycles. By embracing these tools, IT services companies can reposition themselves as managers of AI-enabled delivery, ensuring that they stay relevant in a rapidly evolving market.