Is the IT sector heading for a recession in 2025-26? According to J.P. Morgan Global Research, there is a 35% likelihood of a U.S. and global recession in 2026. Inflation is also expected to stay stubborn, continuing to influence economic conditions. Indian tech companies are already under stress. In 2025, TCS cut 2% of its staff, affecting more than 12,000 employees. This move came as the economy slowed down and AI tools started replacing more manual work. Also, if a recession hits, U.S. firms may reduce IT budgets – affecting outsourcing to Indian IT companies and stalling projects. In this guide, we’ll cover when the recession in IT might hit, its expected duration, and how the industry could recover. Plus, we’ll share tips to navigate these challenging times and emerge stronger.
What is Recession?
A recession is when an economy slows down for a period of time. It usually happens when –
- Businesses stop growing
- People lose jobs
- Spending drops
During a recession, companies may earn less money, leading to fewer jobs and less investment in new projects. Recessions can last for months or even years – but they eventually end when the economy starts to grow again.
About Recession in IT Sector
A recession in the IT sector occurs when technology companies face economic challenges – leading to slower growth and reduced spending. During this time, firms may –
- Cut jobs
- Delay projects
- And lower budgets
Did you know? The Indian IT sector experienced notable downturns during the global economic recessions of 2001 and 2008.
- 2001: The dot-com bubble burst led to a global recession – severely affecting the Indian IT sector.
- 2008: The global financial crisis hit the Indian IT industry hard. Companies like Infosys, Wipro, and TCS saw slowed growth, fewer new contracts, and workforce reductions.
Despite these downturns – the Indian IT sector recovered both times.
Is IT Sector in Recession Right Now?
So, is it recession now?
Well, the global and Indian IT sector is not in an official recession, but it is going through a noticeable slowdown.
Why it feels like a recession?
- Many tech companies globally have slowed hiring, cut jobs, and delayed projects due to weaker demand and cost pressures, which are common signs of stress in the sector.
- In India, foreign investor outflows and soft demand have weighed on IT stocks and growth, contributing to pressure on earnings and hiring.
- Reports show large drops in tech hiring (e.g., India’s tech openings down ~24% in early 2026), reflecting caution by employers.
Why it is not a formal recession?
- A recession is usually defined by broad, prolonged declines in output, revenue, and employment across an entire economy. While many IT firms are under strain, the industry hasn’t been declared in an official recession by economists or statistical agencies.
- Some outlooks still see growth or stabilization ahead, especially driven by AI spending and supportive monetary policy, which could soft-land the tech slowdown rather than turn it into a full recession.
Recession at a Global Level
The global IT sector isn’t in a formal recession, but it has been in a clear slowdown. Many companies have reduced headcount because of cost pressure, economic uncertainty, and faster AI adoption.
- Tech layoffs in 2025: Layoffs.fyi tracked 122,549 tech employees laid off in 2025.
Note: Another tracker, TrueUp, estimates a higher number (245,953 people impacted in 2025) because trackers use different coverage and methods.
- Microsoft removed up to 15,000 roles, with a major wave in July impacting around 9,000 employees worldwide during internal reorganisation.
- Amazon carried out its largest corporate workforce trim, ending about 14,000 office-based roles in October.
- Intel completed a 15% headcount reduction cycle, later indicating plans to reshape its core workforce to around 75,000 full-time employees.
- Salesforce cut around 4,000 support roles using AI-driven workflows, but continued hiring for advanced AI product and engineering teams.
- HP confirmed a long-term efficiency plan, projecting 4,000–6,000 total reductions by 2028, as part of a global redesign.
- Despite layoffs, spending is still rising: Gartner forecasts worldwide IT spending will reach $6.08 trillion in 2026, up 9.8% from 2025. This shows that budgets are shifting (especially toward AI infrastructure/software), not disappearing.
What this means: These are strong signs of stress and restructuring, but it is still more accurate to call it a slowdown/rebalancing than a full IT recession.
These are signs of economic stress, but not a full recession yet.
Recession in the Indian IT Sector
India’s IT sector is not in a formal recession, but it is facing challenges. Global economic issues, reduced outsourcing, and tech layoffs are affecting major companies like TCS, Infosys, and Wipro.
Let’s take a look at some statistics about IT recession 2025.
- TCS: TCS reduced its workforce by about 2% in 2025, affecting more than 12,000 employees. The layoffs were concentrated in mid- to senior-level roles as the company shifted toward an AI-centric delivery model and realigned skills.
- Amazon’s global cost restructuring resulted in about 1,000 corporate layoffs in India in late 2025.
- Ola Electric cut 1,000+ jobs as it focused on tightening costs and improving profitability, particularly in front-line operations that were increasingly automated.
- Zepto reduced its workforce by ≈300 roles, outsourcing more functions and deploying software tools for tasks like invoicing and inventory management.
- VerSe Innovation (Dailyhunt & Josh) laid off ≈350 employees, citing funding pressures and increased use of AI for content moderation and recommendation workflows.
- The Promotion and Regulation of Online Gaming Act (POGO Act) effectively banned real-money gaming in India, drastically affecting the industry. Mobile Premier League cut 600+ jobs, Gameskraft cut ~400 roles, and Dream11 redeployed ~500 engineers to new projects.
- It is estimated that ~200,000 indirect jobs across payment services, marketing, customer support, and other ecosystems were pressured by the regulatory shift.
- Hiring has cooled: At the start of 2026, a report cited by Economic Times said active tech job openings in India were down ~24% YoY, showing continued caution in hiring.
- Silent Layoffs: In India, there’s evidence of a “silent layoffs” trend, where workers leave through performance exits and voluntary attrition rather than formal announcements. It was projected to affect 50,000+ people in 2025.
- But spending outlook remains positive: Gartner forecasts India IT spending will reach $176.3B in 2026, up 10.6% from 2025.
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Recession 2026: When Will It Start?
Current economic forecasts indicate that the U.S. and global economy are unlikely to enter a formal recession in 2026.
In 2025, J.P. Morgan estimated roughly a 40% chance of a U.S. and global recession by year-end, reflecting economic caution. For 2026, they place the recession risk at about 35%, with inflation still proving difficult to fully contain.
India is still seen as one of the stronger major economies. Most economists believe the country is unlikely to enter a formal recession.
When Will IT Recession End?
If an IT sector recession were to begin in 2026, most analysts expect it would likely run for about 6 to 12 months, depending on how fast business demand improves and how quickly companies retrain teams for AI-driven delivery.
The tech job cuts you read about from 2025 were part of a long transition phase. IT firms are expected to keep adjusting their workforce through 2026, especially at the middle and senior layers, while growth teams tied to AI projects continue hiring.
Instead of calling this a recession, it is more accurate to describe the sector today as being in reshaping mode.
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Factors Contributing to the IT Sector Recession
Several factors are contributing to the IT companies recession – including:
- Economic slowdown: A general decline in the economy can reduce spending on IT services – leading to lower demand.
- Rising inflation: Higher costs for goods and services can squeeze company budgets – causing cuts in IT spending.
- Interest rate hikes: Increased interest rates make borrowing more expensive – leading companies to cut back on investments.
- Job cuts in major companies: Layoffs at major tech firms create a ripple effect – reducing confidence in the industry and overall spending.
- Shift to automation: As companies adopt automation and AI – there may be less need for traditional IT roles, leading to job losses.
- Global uncertainty: Political and economic instability in key markets can make companies cautious about spending on IT projects.
- Changing consumer behaviour: Changes in how consumers use technology can shift demand away from traditional IT services.
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The Impact of Recession in IT Industry
The IT market recession can have several significant impacts, including:
- Job losses: Many IT companies may reduce their workforce – leading to significant job losses across the sector.
- Reduced outsourcing: Global clients might cut back on outsourcing IT services – affecting the revenue of Indian firms.
- Slower growth: The overall growth rate of the IT sector could slow down – making it harder for companies to expand and invest in new projects.
- Budget cuts: Companies may lower their IT budgets – impacting investments in technology and innovation.
- Shift in focus: Firms may shift focus to high-demand areas like cybersecurity and artificial intelligence to stay competitive.
- Pressure on startups: Smaller IT companies and startups could struggle more than larger firms – facing challenges in securing funding and clients.
- Market adaptation: The sector may adapt by enhancing skills and pivoting to emerging technologies to recover from the downturn.
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Tips to Deal with Recession in IT Sector
For IT Companies
To navigate the challenges of recession in tech industry – IT companies should consider the following tips:
- Focus on core services: Concentrate on your main offerings and improve their quality to retain clients and boost satisfaction.
- Adapt to market needs: Stay flexible and adjust your services based on current market demands and trends.
- Improve efficiency: Look for ways to cut costs and improve processes without sacrificing quality.
- Build strong relationships: Maintain good communication with clients to understand their needs and strengthen partnerships.
- Explore new markets: Consider expanding into new industries or regions that may have better growth opportunities.
- Plan for the future: Develop a solid strategy for recovery, including goals and actions for when the market improves.
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For IT Workers and Professionals
Employees and professionals can take these steps to stay resilient during a recession IT sector:
- Enhance skills: Invest in training to keep your skills up to date with new technologies and trends.
- Network actively: Build and maintain professional connections to open doors for new opportunities.
- Stay informed: Keep an eye on industry news and trends to anticipate changes in the job market.
- Consider freelancing: Explore freelance or contract work to diversify your income sources.
- Be open to change: Stay flexible and be willing to adapt to new roles or projects that may arise.
- Save and budget wisely: Manage your finances carefully to prepare for uncertain times ahead.
- Find better job opportunities: Explore job listings on Hirist to discover new roles that match your skills and aspirations.
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Future Outlook for the IT industry
The future outlook for the IT industry is positive, driven by growth in areas like –
- Artificial intelligence
- Cloud computing
- Cybersecurity
As businesses depend more on digital solutions, the demand for IT services is expected to rise. While there may be short-term challenges due to the economy – companies will likely invest in new technologies to improve efficiency. The increase in remote work and digital transformation will also support the sector.
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Wrapping Up
We hope this blog answers all your questions about the recession in IT sector for 2025-26. While the industry faces challenges – focusing on core services and adapting to new trends can help companies and professionals navigate these tough times. If you’re looking to boost your career during this period, be sure to visit Hirist – a great platform to find the best IT jobs in India.
FAQs
Will the IT sector boom in 2026?
Yes, the IT sector is expected to grow in 2026, but it may not be a dramatic “boom” across the board. Growth is likely to be steady and driven by new technologies like AI, cloud and data infrastructure, even as traditional services remain subdued.
What is the recession indicator for 2026?
Key indicators include rising unemployment rates, reduced spending, and slowing economic growth.
What is the recession period in IT industry?
The recession period in the IT industry can vary but often lasts from 6 to 12 months.
How long do recessions last?
Recessions typically last between 6 months to 2 years – depending on economic conditions and recovery efforts.
Can technology and recession coexist positively?
Yes, technology can improve efficiency – helping businesses adapt and survive during a recession.
