AI deflation and global slowdown weigh on IT services growth outlook FY27

Global uncertainty, a slowdown in client spending, and emerging “AI deflation” are weighing on the near-term outlook for the IT services industry, with analysts pencilling in softer growth for FY27.

The sector is expected to post muted revenue expansion of around 3–4 per cent in the near term, as productivity gains from artificial intelligence begin to compress traditional pricing models. Analysts estimate a 2–3 per cent AI-led revenue deflation in both FY27 and FY28, as early gains from generative AI reduce billable hours and weaken the headcount-led revenue structure before new AI-driven income streams scale up.