A pessimistic prognosis for Indian IT in 2026 is shaped by US immigration restrictions and the rise of AI

India’s $280-billion information technology industry is heading into 2026 navigating a complex mix of visa-related headwinds, global trade uncertainty, and geopolitical risks, even as it undertakes its largest-ever push into artificial intelligence (AI) and accelerates the expansion of global capability centres (GCCs).

Heightened scrutiny of the US H-1B visa programme has emerged as a key challenge. Proposed measures — including a $100,000 fee for new visas and discussions around a possible 25% outsourcing tax — have complicated cross-border delivery models for Indian IT firms. Although clarifications later limited the scope to new visas, concerns resurfaced due to social media screening requirements and unpredictable processing delays.

The US remains the largest export market for Indian IT services. The visa proposals triggered market volatility in late 2025, disrupted employee travel plans, and weighed on IT stocks. Analysts warn that sharply higher visa costs could add hundreds of millions of dollars to expenses for large IT companies, reinforcing the shift toward offshore delivery and non-US hubs.

“A $100,000 fee on new H-1B visas could materially raise costs for large players, accelerating the move to offshore execution and strengthening delivery capabilities in India and other geographies,” said Biswajeet Mahapatra, Principal Analyst at Forrester.

Despite near-term uncertainty, experts believe these pressures are also driving multinational firms to expand GCC operations in India as a hedge against regulatory risk and margin pressure. According to Sindhu Gangadharan, chairperson of Nasscom and managing director of SAP Labs India, Indian IT companies have already reduced dependence on H-1B visas by increasing local hiring in the US and strengthening India-based delivery.

“The H-1B programme was always a temporary bridge to address skill gaps. High-skill talent remains central to innovation and competitiveness, especially as AI and frontier technologies reshape the global economy,” she said.

Muted start to 2025, followed by an AI-led rebound

Client spending remained soft in early 2025 as US and European enterprises tightened discretionary budgets. Sentiment improved later in the year as AI programmes matured and demand stabilised in the banking, financial services and insurance (BFSI) segment.

Global technology majors such as Microsoft and Google announced multi-billion-dollar investments in gigawatt-scale data centres and sovereign AI infrastructure in India, reinforcing the country’s strategic importance. Microsoft said it would invest $17.5 billion to build cloud and AI infrastructure, skills and trust ecosystems in India.

“When digital public infrastructure meets AI, adoption can scale from classrooms to boardrooms and from farms to factories,” said Puneet Chandok, President, Microsoft India and South Asia.

Globally, AI investment crossed $200 billion, although analysts flagged risks of overheating due to circular financing between hyperscalers, startups and chipmakers.

Among Indian IT majors, Infosys raised its FY26 revenue guidance to 2–3%, while HCL Technologies increased the lower end of its services growth outlook to 4–5%. Infosys also announced its largest-ever share buyback of ₹18,000 crore, priced at ₹1,800 per share.

Structural resets and workforce reshaping

The industry also witnessed significant restructuring. TCS announced plans to lay off about 2% of its global workforce (around 12,200 employees) as part of a “future-ready” transformation focused on AI adoption, technology modernisation and market expansion. Subsequent quarterly disclosures showed a sharper-than-expected decline in headcount, triggering criticism from employee unions.

Across the sector, companies accelerated GenAI training, redesigned delivery models around AI agents and workflow automation, and stepped up mergers and acquisitions to fill capability gaps. Recent deals include:

• TCS acquiring Coastal Cloud for $700 million

• Wipro buying HARMAN’s digital transformation unit for $375 million

• Infosys acquiring a 75% stake in Versent for $153 million

• HCLTech purchasing HPE’s Telco Solutions Business for up to $160 million

Firms also rolled out proprietary AI platforms and trained hundreds of thousands of employees on generative AI tools, even as monetisation remains uneven.

“AI is past the hype phase but not yet a universal revenue engine,” said Navnit Nakra, Partner and Technology Sector Leader at PwC India. “The real value will emerge where agentic AI is deeply embedded into workflows, products, pricing and risk decisions.”

GCCs emerge as a long-term growth anchor

India continues to strengthen its position as a global GCC hub, attracting banks, insurers, technology firms and multinationals. The GCC ecosystem is projected to reach $105 billion by 2030, supporting 2.8 million jobs across 2,400 centres.

“We expect GCC growth to be a strong story in 2026 and possibly accelerate further,” said Siddhartha Tipnis, Partner and Technology Sector Leader at Deloitte India. Akhilesh Tuteja, Partner at KPMG in India, added that 2026 could mark a year of resilience and optimism, supported by improving discretionary spends and targeted investments in next-generation technologies.

As the industry prepares for 2026, analysts say Indian IT’s competitive edge will depend on deepening AI leadership, building resilient global delivery networks, and remaining agile amid macroeconomic volatility — lessons reinforced by the turbulence of 2025.