Revenues of tech companies to see significant momentum starting FY28: Nasscom chairperson

The recently reported Q1FY27 results and management commentary from Indian IT services firms have reflected a tone of cautious optimism, coupled with a robust deal pipeline. Companies have also pointed to subdued discretionary spending and increased allocation of enterprise technology budgets towards artificial intelligence (AI), with AI-led revenues clocking double-digit quarterly growth.

While Nasscom had earlier projected the industry's growth for FY27 to remain similar to FY26 at 5-6%, its chairperson Srikanth Velamakanni expects the sector to witness significant positive momentum in revenues over the next three quarters, with the impact becoming visible from FY28.

"My sense is that the worst is behind us," Velamakanni told Fortune India, adding that AI is now helping software firms build solutions faster, cheaper and with fewer people, while expanding the scope of enterprise use cases.

"Tech will start to accelerate because the AI components of that revenue, for example, solving complex enterprise AI challenges with the new foundation models, building those harnesses, building that context layer, and modernizing the tech platforms, there is a near infinite demand inside companies and tech budgets are only going up," he added.

His comments back the recent upward revision of global IT spending by research and advisory firm Garter. The firm forecasts global IT spending to be $6.37 trillion in 2026, up 14.2% year-on-year from its earlier estimate of $6.31 trillion released in April. Gartner said the increase in IT spending is being driven by rising investments in AI infrastructure and software, with organisations allocating more capital towards AI-optimised servers, cloud services and AI-ready software.

Given the billions of dollars in capital expenditure being undertaken by US technology majors globally, Velamakanni sees a significant opportunity for Indian IT services companies, particularly in enterprise AI application development.

While the jury is still out on how companies will monetise these large AI investments and manage the long-term cost of inferencing, Velamakanni said competition among large language model providers and hyperscalers will play a decisive role in determining AI pricing.

"A lot of the build-out actually portends well for how much usage will be there and how the prices will shape over the next few years. Companies will be incentivized to go and use AI," he said.