Indian information technology companies could be headed for a slower-than-expected March quarter and a muted start to FY27 as escalating geopolitical tensions in West Asia delay client decision-making at a sensitive juncture for the sector.
“As things stand today, the impact on Indian IT companies will be a slowdown in decision-making in Q4. This could result in a slower-than-expected growth in the March quarter and Q1 of FY27. However, if things continue to escalate, then the slowdown could extend into Q2,” said Gaurav Vasu, founder and chief executive of UnearthInsight.
Direct revenue exposure to the region remains limited, with West Asia accounting for less than 2% of revenues for most large Indian IT firms. However, the region has emerged as one of the faster-growing markets outside North America and Europe, supported by digital transformation programmes, public sector technology spends and a growing presence of global capability centres (GCCs).
What do analysts say?
Analysts said the immediate risk lies not in cancellations but in slower approvals and deferred ramp-ups, particularly as global macro uncertainty rises. As a result, companies may have to rely more heavily on baseline or run-the-business work, while discretionary and exploratory projects are pushed out. If uncertainty persists, it could weigh on growth momentum through a significant part of the next fiscal year.
“The larger worry is that this turmoil will delay transformation cycles for Indian IT and push companies to focus more on the short term rather than long-term programmes,” said Pareekh Jain, chief executive and lead analyst at EIIRTrend. “On the positive side, there was a wave of GCCs coming up in the middle east, some of which may now look at India as an alternative location.”
What do Industry observers say?
Sector watchers added that certain verticals could feel the impact sooner. Fourth-quarter technology budgets for travel and tourism companies, as well as parts of insurance, which have been among the faster-growing segments for Indian IT, could see slower decision-making in the near term.
Industry body Nasscom said it remains in constant touch with its Middle East Council and that operations across the industry are continuing as usual for now, even as companies remain vigilant. “Employee safety and security remain the industry’s foremost priority,” Nasscom said, adding that member companies have been advised to defer non-essential travel to affected areas and enable work-from-home arrangements for employees currently in the region.
The added geopolitical uncertainty comes at a time when the sector is already grappling with concerns around artificial intelligence-led disruption. Recent advances in AI capabilities announced by Anthropic in February triggered a broad sell-off in technology stocks globally, as investors reassessed traditional outsourcing models and billing structures. This followed December-quarter earnings commentaries where several Indian IT firms had pointed to improving deal pipelines and faster client approvals, raising expectations of steadier momentum into the March quarter.
Operational risks have also come into focus. Over the weekend, two facilities operated by Amazon Web Services in West Asia were knocked offline, disrupting cloud services across parts of the region. While cloud infrastructure is designed with redundancy, the outage affected customers’ ability to reliably store and retrieve data after a second facility was impacted, AWS said in updates to customers.
“It is not as simple as it sounds, and the time taken to get back up and running can vary widely,” said Faisal Kawoosa, founder and chief analyst at Techarc. “Services will be impacted, and restoring power alone does not solve the problem as client-side configurations also need to be changed.”
Kawoosa added that Indian companies are unlikely to face a material impact due to data localisation practices, though some spillover effects could occur due to network dependencies for traffic passing through the region.