Between 2020 and 2024, Indian Information Technology (IT) companies experienced significant growth driven by global technology spending, particularly in cloud migration and digital transformation. However, by 2025, demand uncertainty led to a slowdown, with the Nifty IT index declining 12.6%. This downward trend intensified in 2026, with the index plunging 20.7% year-to-date, reflecting a broader market decline of only 4.5%. The shift toward AI technologies poses a potential threat to traditional revenue streams, as application development and maintenance give way to more complex areas like platform engineering and AI implementation. Brokerages have noted potential deflationary risks, estimating a 20-50% impact on traditional IT services due to AI efficiencies. Despite these challenges, opportunities exist in legacy code modernization, projected to be a $600 billion market. Large-cap firms, including Tata Consultancy Services and Infosys, reported year-on-year revenue growth, while mid-cap firms experienced volatility. Analysts suggest a cautious investment approach, focusing on firms with strong cash flows and clear AI strategies, indicating that while the sector is transitioning, it is not collapsing.