Deal ramp-downs, repricing pressure signal tough road ahead for IT services firms

p>In Q4 FY26, IT services firms had to deal with multiple challenges amid a tougher macro environment.

Though other firms did not explicitly mention ramp-downs, HCLTech reported deal losses, signalling headwinds ahead for IT firms in FY27.

Analysts said conversion delays or cancellations are a real risk and that AI deflation will aggravate in the coming year.Infosys’ guidance of 1.5-3.5% (1.25-3.25% in organic CC) in FY27 is below Motilal Oswal Financial Services’ estimates at the top end.

“It tells us that AI is now compressing the existing book of business.

While part of this is attributable to competitive intensity and pricing in a low-demand environment, we expect the impact of deflation to continue as AI productivity benefits are passed on to clients,” Motilal Oswal said.

.The second-largest IT services firm, in line with peers, pointed out that telecom demand remains uncertain in FY27, as clients pare back spends and move to agentic AI across IT and BPS.

“This comes on the back of a difficult couple of years for the sector, with discretionary spends still selective and decision-making slowing in pockets like manufacturing and Europe.

Manufacturing faces a 75-100bp headwind from Daimler ramp-down,” the brokerage firm stated.Margins remained stable for Infosys at 21% in FY26, with benefits from currency and Project Maximus being reinvested into AI capabilities, talent, and sales.

FY27 margin guidance of 20-22% factors in headwinds from wage hikes, AI productivity pass-through, and about 70bp impact from acquisitions, partly offset by efficiency initiatives, it said, estimating EBIT margins at 20.9%/21.0% for FY27E/FY28E.

.It also said that repricing pressure is most visible at the bid/renewal stage.During the company’s Q4 FY26 earnings conference, Infosys CEO and MD Salil Parekh said, “As we look ahead to the financial year 2027, we see large opportunities in AI services, continued competitive intensity and AI productivity impact.

With a clear AI strategic road map and real-world toolkit of Topaz Fabric, we are well-positioned to support our clients’ transformation, technology and operations objectives.”The company expects acceleration in growth in Financial Services, and the Energy, Utilities, Resources, and Services verticals, and expects H1 to be stronger than H2.CFO Jayesh Sanghrajka said the FY27 guidance includes contribution from Stratus, which the company closed last week, but excludes....