From U.S. trade policy to AI automation, multiple global forces are reshaping the revenue models
The shifts in dynamics in the erstwhile booming IT sector of the country are, today, signaled by notable revenue drops for the leading technology companies of India. While IT spending has, on average, increased, some factors have contributed to the downturn.
Global Economic Uncertainty
One of the main reasons for the decline in revenues is the ongoing global economic uncertainty. The major economies, US and Europe, which buy quite a substantial portion of the Indian IT output, are under some economic scrutiny. This has resulted in clients reducing discretionary spending in areas like manufacturing, retail, and high-tech industries. Such cautious conduct has seen delay in deal closures and hence revenue streams.
U.S. Tariffs and Trade Policies
The new U.S. trade policies, including tariffs, have added further twists-and-turns to the issues Indian IT firms are dealing with. While the tariffs might not be targeted at IT services per se, they are affecting key client industries like manufacturing and logistics. The increased costs and uncertainties faced by these sectors are causing tightening of IT budgets and in effect hurting the revenues of Indian tech companies.
Rise of Global Capability Centers (GCCs)
Multinational corporations are increasingly setting up their own Global Capability Centers (GCCs) in India. These in-house centers allow companies to internally manage IT services rather than depending on the traditional outsourcing model. This trend has led to a decrease in demand for services from Indian IT giants, impacting their revenue growth.
Automation and Artificial Intelligence
The advent of automation and artificial intelligence (AI) is transforming the IT services landscape. AI-powered tools are automating tasks that were traditionally performed by human workers, leading to a reduction in demand for certain services. This shift is compelling Indian IT firms to adapt their service offerings and invest in new technologies, which may not immediately compensate for the revenue lost from traditional services.
Currency Fluctuations
Currency volatility, particularly the depreciation of the Indian rupee against the U.S. dollar, has had a mixed impact on Indian IT companies. While a weaker rupee can make Indian services more competitive globally, it also increases the cost of imported technologies and can affect profit margins.
The revenue declines faced by India’s tech giants in 2025 are the result of a complex interplay of global economic factors, changing client behaviors, and technological advancements. To navigate this challenging environment, Indian IT firms are focusing on diversifying their service portfolios, investing in emerging technologies, and exploring new markets. The ability to adapt to these changes will be crucial for sustaining growth and maintaining a competitive edge in the global IT industry.
