With AI-driven automation improving delivery efficiency, clients demand cost savings, driving renegotiations and margin compression. These further delay revenue growth despite large deal wins.
India’s IT sector is facing a widening disconnect between strong deal pipelines and modest revenue growth. Conversion ratios have held relatively steady, but revenue realisation has slowed as project launches are delayed, sales cycles stretch, clients rein in discretionary spending, and pricing pressures intensify. Analysts noted that even with record deal wins and healthier book-to-bill ratios, the translation of contracts into revenues remains muted amid persistent macroeconomic uncertainty.
UnearthInsight data indicate that during stable periods, conversion ratios typically range from 75 per cent to 90 per cent, but during downturns like the 2008 recession, the Covid-19 pandemic, and the 2023-25 macroeconomic slowdown period, the ratios drop to around 50-60 per cent. This can be attributed to uncertainty, geopolitical risks, client caution, inflation-caused project delays, cancellations, or slower client spending, as well as supply constraints affecting deal ramp-up.
In FY25, the conversion ratio of the top five IT services firms in the country, TCS, Infosys, Wipro, HCLTech, Tech Mahindra, on an aggregate basis, was around 75-80 per cent. These companies secured over 40 digital transformation deals and over 300 small contracts, spanning both cost optimisation initiatives and large-scale transformation projects. The top four firms alone accounted for 18 major digital transformation deals during the year.
Gaurav Vasu, the founder & CEO of UnearthInsight, said, “Despite this robust deal momentum, industry revenue growth remained modest at 3–5 per cent, as the conversion of new wins to revenues lagged. Project launches were frequently delayed, sales cycles extended, and clients prioritised cost optimisation amid ongoing macroeconomic uncertainty. Although deal volumes reached record highs, cautious client behaviour slowed execution, leading to only modest growth for the sector.”
Alongside, Akash Verma, Practice Director at Everest Group, noted that in the April–June quarter, Indian IT firms again saw a gap between book-to-bill ratios and revenue growth, after three quarters where the two had moved in sync. For instance, the book-to-bill ratio for TCS, Wipro, and Cognizant improved to 1.38x from 1.32x in the previous quarter, but year-on-year constant-currency revenue growth dropped sharply to 0.4 per cent from 3.7 per cent a quarter earlier.
According to data from BNP Paribas Exane and ISG, in the period spanning H2 2024 to H1 2025, average contract values (ACVs) remained muted as deal tenures lengthened, with $100 million-plus contracts now averaging nearly six years compared to under four years in 2H21–1H22.
Deals worth $10–39 million now average around 3.3 years versus 2.8 years in 2H21–1H22, while $40–99 million contracts have stretched to about 4.3 years from 3.5 years earlier. The sharpest jump has been in $100 million-plus deals, which now span nearly six years compared with under-four previously. Smaller $5–9 million deals have held steady at about 2.5 years.
On the other hand, the gap between announced mega-deals and realised revenues has widened, as the actual revenue conversion from backlog is often realised over 12-24 months, aligning with multi-year contracts.
Vasu noted that this widening gap stems mainly from fewer mega deals exceeding $100 million and a rise in smaller, fragmented agreements that feature longer renewal timelines. Enterprises are pursuing these deals to avoid vendor lock-in, which, in turn, is causing a slower transition from deal wins to actual cash flow.
AI-driven
Pricing pressures are also rising. With AI-driven automation improving delivery efficiency, clients demand cost savings, driving renegotiations and margin compression. These further delay revenue growth despite large deal wins.
The current macro slowdown has led to cautious client spend, larger deal fragmentation, and some divergence between rising TCV numbers and slower revenue growth, causing analysts and companies alike to track supplementary metrics like the book-to-bill ratio.
While overall deal wins look strong, the money is being spread over more years, which softens yearly growth. While every deal includes a fixed spending commitment, the discretionary portion of those large contracts usually fails to materialise when conditions turn challenging.
“In the April–June quarter, deal announcements continued to reflect the momentum built up through 2024, with many deals already in the pipeline and underlying demand still intact. However, by the January–March quarter of the last financial year, uncertainty had set in, and the numbers were weaker compared to calendar years 2023 and 2024. Realisation of revenue had already begun to slow during that period, and this trend continued into Q1 FY25–26 and is persisting in Q2,” Ashutosh Sharma, VP & Research Director, Forrester, explained.
Although US–India relations remain fragile due to the tariff situation, US companies appear to be recovering and maintaining healthy spending. If this momentum sustains, deals that did not materialize in the 2025 calendar year could potentially close in late 2025 or early 2026.
Published on August 21, 2025
