The Indian Information Technology sector has entered a definitive recovery phase in February 2026. While early 2025 was marked by geopolitical concerns and trade policy shifts, the current landscape reflects a transition from cautious experimentation to high-impact execution. Market analysts now view fears regarding AI-driven disruption as significantly overstated. Instead of replacing the traditional workforce, generative AI is serving as a catalyst for productivity. Industry leaders highlight that the fear of job losses is being replaced by the reality of "Human + AI" delivery teams. Over 2 million Indian IT professionals have already been upskilled in advanced AI domains. Valuations for major players have stabilized at attractive levels. Tata Consultancy Services (TCS) maintains a dominant market capitalization of approximately 11.64 trillion, while Infosys stands at 6.61 trillion. These figures are increasingly supported by fundamental earnings rather than speculative growth, with the Nifty 50 trading near its 5-year average price-to-earnings ratio of 20.5x. Sector performance in FY26 remains resilient, with total industry revenue projected to hit 315 billion, representing a 6.1% increase. While FY26 is characterized by cost discipline and a single-digit earnings growth environment, the outlook for FY27 is considerably more aggressive. Analysts predict double-digit earnings expansion as the industry fully adopts outcome-based project models. The structural shift toward outcome-led transformation is a key theme for 2026. Global clients are moving away from traditional time-and-material contracts in favor of strategic partnerships. These new agreements prioritize measurable ROI and specific business results, allowing Indian firms to capture higher margins through proprietary AI platforms. Investment in the sector remains robust, supported by a normalization of attrition rates to 16.4%. Domestic institutional flows continue to provide a floor for stock prices, with monthly SIP inflows reaching record highs of nearly 30,000 crore in late 2025. This domestic liquidity has helped the IT sector withstand the volatility of foreign institutional outflows. Global Capability Centers (GCCs) are emerging as a powerful growth engine within the ecosystem. These centers are projected to see salary increments of 10.4% in 2026, outperforming the broader tech industry’s 9.1% average. This trend underscores the growing sophistication of work being offshored to India, extending beyond maintenance into core R&D and semiconductor design. Looking toward FY27, the convergence of "Agentic AI" and intelligent operations is expected to drive a new cycle of growth. With corporate tax realizations rising and a disciplined fiscal deficit, the macroeconomic environment remains conducive for long-term equity accumulation in the technology space.