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IT Sector Faces Transformation: Challenges and Opportunities

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  Published in Stocks and Investing on Thursday, February 26th 2026 at 12:46 GMT by moneycontrol.com
      Locales: INDIA, UNITED KINGDOM

New Delhi, February 26th, 2026 - The Information Technology sector is entering a period of significant transformation, marked by both challenges and opportunities, according to Gaurav Dua, Head of Institutional Research at Standard Chartered Securities. Speaking in a recent interview, Dua articulated a nuanced outlook, predicting a period of differentiation where some IT firms will falter while others will thrive, but ultimately asserting that the industry as a whole will emerge stronger - a pattern observed in previous technological upheavals.

While recent performance has been mixed, with margin pressures and a noticeable slowdown in discretionary spending impacting many players, Dua's analysis focuses on the long-term trajectory. The current environment isn't a death knell for the industry, but a catalyst for restructuring and innovation. The key, he stresses, lies in adapting to the two dominant forces reshaping the IT landscape: generative artificial intelligence (AI) and cloud computing.

The Generative AI Revolution & Cloud's Continued Ascent

The rise of generative AI - exemplified by advanced large language models capable of creating text, images, and even code - presents a paradigm shift for the IT sector. Companies successfully integrating generative AI aren't merely automating existing tasks; they're unlocking entirely new revenue streams and service offerings. This includes applications in areas like hyper-personalization of customer experience, accelerated software development, and the creation of intelligent automation solutions. Dua warns that firms failing to embrace this technology risk obsolescence.

Cloud computing, while no longer a novel concept, continues to be a critical driver of growth and efficiency. The shift to the cloud is largely complete for many enterprises, but the focus is now on optimizing cloud infrastructure and leveraging more sophisticated cloud-native services. This requires expertise in areas such as containerization, serverless computing, and multi-cloud management - skills that are increasingly in demand. The synergy between generative AI and cloud computing is particularly potent; AI models require significant computational power and data storage, making cloud platforms the natural home for AI-driven applications. The combination allows for scalable, flexible, and cost-effective deployment of these transformative technologies.

Selective Investment: Identifying the Future Leaders

Given this evolving landscape, Dua advises investors to exercise caution and adopt a highly selective approach. Broad-based investments in the IT sector are no longer advisable. Instead, investors should prioritize companies demonstrating a strong foundation in fundamentals and a proven ability to execute their strategic vision. This means examining key metrics beyond topline revenue growth. Profitability, cash flow generation, and return on invested capital are crucial indicators of long-term sustainability. Furthermore, investors should look for companies actively investing in research and development, building strong partnerships within the AI ecosystem, and attracting and retaining top talent.

Beyond financial metrics, Dua suggests focusing on companies demonstrating a clear understanding of their target markets and a differentiated value proposition. Niche players specializing in specific AI applications or cloud services may outperform larger, more diversified firms. Companies that can successfully navigate the complexities of data privacy, security, and regulatory compliance will also be well-positioned for success.

Historical Precedent & Future Outlook

Dua draws parallels to previous transitions in the IT industry, such as the shift from mainframe computers to personal computers and the rise of the internet. Each of these disruptions created winners and losers, but ultimately led to a more vibrant and innovative IT sector. He believes the current wave of innovation will follow a similar pattern. The IT industry has historically demonstrated a remarkable capacity for adaptation and reinvention.

Looking ahead, the demand for IT services is expected to remain strong, driven by factors such as digital transformation, the proliferation of data, and the increasing importance of cybersecurity. However, the competitive landscape will become increasingly fierce. Companies that can successfully capitalize on the opportunities presented by generative AI and cloud computing will be the ones that thrive. Those that fail to adapt risk being left behind. The next few years will undoubtedly be a period of significant change for the IT sector, but Dua remains optimistic about its long-term prospects, predicting a resilient and ultimately stronger industry capable of driving innovation and economic growth.