An improved and positive outlook is expected for IT services companies in the year 2025 as the macro uncertainty gradually eases. At the same time, it is likely that the demand scenario might improve and a strong US Dollar versus the Indian Rupee would also provide better margins for the IT services in the year 2025. As per this scenario, the majority of Indian IT services companies are also likely to report improvement in revenue growth rates. Certain sectors such as the Banking and Financial Services and Insurance (BFSI) will drive this growth whereas in 2025 the slow-growing manufacturing mainly the automotive segment may affect the revenue growth going forward.
As per a report by Emkay Global for the IT and technology segment, of late, the BFSI segment has seen lower project cancellations, the beginning of the interest rate cut cycle, and the end of uncertainties around US elections, albeit gradually. Besides this there have been large deals ramp up and strong execution which may benefit select IT services companies in India in the coming year. As per the Emkay report for the year 2025, it is expected that there is likely to be an uptick in discretionary spending by companies which is likely to benefit IT services companies.
There is likely to be an increase in hiring plans for IT services companies in 2025 as many companies have chalked out their plans to increase their utilization levels by hiring more people. A progress in Gen AI is also expected during this year. More clarity is expected once the customers finalise their IT budgets for the current year. But one thing as per IT market experts is that project deferments or cancellations that were happening during the early part of 2024 have now reduced due to the end of uncertainties around US presidential elections as well as elections in other major developed markets. This will further ease in the year 2025.
Healthy recovery signs have been observed by market analysts in the BFSI segment in the North American market which should continue in the year 2025 as well. However, weakness in the Europen market is expected to be there in 2025 plus the pressure on the automotive vertical is also expected to continue in 2025 as well. The pricing environment is expected to remain competitive amid constrained budgets and will continue to experience lower pricing across the businesses.
As per Gartner there is further positive news for the Indian IT sector as IT spending in India is expected to increase by 11.2 percent from year to around $160 billion in 2025. This spend will be driven by spending in software and IT services. In 2024, the overall IT spending grew 10.7 percent to $124.61 billion after shrinking by 0.5 percent at $112.56 billion in 2023.
