India's information technology services sector is likely to witness an extended period of subdued growth as artificial intelligence adoption and geopolitical uncertainty continue to dampen enterprise technology spending, according to a research report by JPMorgan.

The brokerage said the industry has remained stuck in a low-growth phase, with revenue growth of just 2-3% over the past three years. It believes AI-driven productivity gains are reducing demand for traditional IT services faster than new AI-related opportunities are emerging, creating structural headwinds for the sector.

JPMorgan noted that enterprises continue to delay technology spending decisions amid rapid changes in artificial intelligence and an uncertain global geopolitical environment. According to the report, delays in deal signings and project ramp-ups are likely to persist, with the weakness expected to extend into the second quarter of FY27.

The brokerage said the industry remains in the first stage of its three -phase AI adoption cycle, described as the "Deflation" phase, where efficiency gains from AI-led automation in legacy and maintenance services are not yet offset by revenue from new AI-based offerings. As a result, it expects the industry's recovery to be significantly delayed.

Reflecting the weaker outlook, JPMorgan has lowered its medium - and long-term growth expectations and no longer expects large-cap IT companies to return to their historical revenue growth range of 7 -8%. Instead, it forecasts revenue growth to remain around 3-4% for the foreseeable future, with any meaningful recovery potentially pushed beyond FY29 into FY30.

The brokerage has also reduced its first-quarter revenue growth estimates across the sector and expects companies to issue weaker FY27 revenue guidance. It believes the typical seasonal strength seen during the first half of the financial year is unlikely to materialize given the current demand environment.

In addition, JPMorgan has cut price-to-earnings valuation multiples by 10-25% across the sector following its reverse discounted cash flow analysis. While IT stocks currently trade below their pre-pandemic valuation averages, the brokerage said these valuations are justified given the industry's structurally slower growth outlook. It added that a sustained improvement in valuations would require stronger revenue growth, for which visibility remains limited.