Russian officials insist that investment activity in the Russian economy peaked in 2024 and that falling investment is nothing to worry about. The surge in investment appears to be coming to an end even in such a locomotive of the Russian economy as the IT sector. In 2025, investment in the development of Russian software companies fell by 37% to RUB 360 bln, according to a study by Russoft, the Association of Software Developers. This year, the sector expects either a recovery in growth or stagnation. Experts say the industry is responding to changes in the tax burden, as most investment is financed from companies’ own funds.
The rapid growth of Russia’s domestic IT sector is probably coming to an end. The slowdown in investment in the sector is one indication of this. According to Russoft, the investment climate in Russia’s IT industry depends heavily on the level of taxation. The partial withdrawal of tax concessions is leading to lower investment in software development.
‘Under current conditions in the software industry, there is a direct correlation between the combined profits of software companies and their total investment in development. Since aggregate net profit fell by about a third in 2025, investment in the software industry declined by almost the same amount,’ the association says.
Russoft attributes the decline in investment in 2025 compared with 2024 partly to the higher tax burden and the continued tight monetary policy of the Central Bank.
‘From January 1, 2025, VAT was introduced for small companies using the simplified tax system, while the zero profit tax rate for accredited IT companies was replaced by a rate of 5%,’ the association notes
The increase in tax payments alone could have reduced investment by only 5% to 10% last year, the experts estimate. Combined with slower demand growth caused by the Central Bank’s high key rate and a number of other factors, however, the decline was more pronounced. As a result of these factors, software developers’ sales grew more slowly than their costs, reducing the profitability of the software business.
Revenue growth is also slowing. According to the association, the combined revenue of Russian software developers increased by 14% in 2025 to RUB 2.8 tn. By comparison, the market grew by 25% in 2024 and 20% in 2023
The slowdown in the IT sector was also recorded by the Ministry of Digital Development. It previously reported that investment in information and communications activities in Russia increased by 37.4% from 2020 levels last year, rather than the planned 46.7%. The ministry headed by Maksut Shadaev attributed this to a decline in investment in telecommunications as a whole because of the high key rate, the high base effect in the IT segment in 2024 and macroeconomic uncertainty. Rosstat, meanwhile, reported that investment in fixed assets across the sector totalled RUB 1.8 tn in 2025, up 2%, or RUB 35.7 bln, from the previous year.
Domestic software developers have somewhat more optimistic expectations for 2026. Total investment in the software industry alone could reach RUB 425 bln by the end of the year, 18% more than in the weak 2025. However, Russoft stresses that this is the most optimistic scenario
‘The realistic scenario assumes a smaller increase. Nor can a decline in investment be ruled out,’ it says.
Another tax policy change came into effect at the start of this year: insurance contributions for accredited IT companies roughly doubled, from 7.6% to 15%. ‘Given that 60% to 80% of software companies’ costs are accounted for by payroll, additional contributions significantly reduce profits, all other things being equal,’ the association says.
Expectations of higher overall investment in 2026 are partly based on forecasts of a larger share of external financing. Nevertheless, most corporate investment is still financed from companies’ own funds, and this trend has changed little. Developers’ own investment accounts for more than 70% of all investment and, including investment by company founders, approaches 80%. Experts expect the share of government funding to increase several-fold, but it remains small overall. In 2026, they estimate, the government’s share could rise to 4.3% from 1.6% a year earlier.
In addition, one in five Russian IT companies could see its annual revenue decline in 2026, Russoft forecasts. At the same time, the total Russian software market is expected to grow by 17% to RUB 3.3 tn.
Not all industry participants will benefit from improved financial indicators. Russoft notes that a significant share of the increase will come from higher prices for software products and services, while demand remains under pressure from the high key rate, rising cost of capital and cautious investment policies among customers. Thus, after several years of rapid development, the sector is gradually slowing its growth, the experts say.
Moreover, the fact that more than 60% of companies expect revenue to grow in 2026 does not mean that this growth will materialise. The researchers note that a year earlier only 3.8% of companies expected their revenue to decline, whereas in reality revenue fell at 25.5% of market participants. Russoft sees the greatest risks in the small and medium-sized business segment. Smaller developers are more likely to face declining profitability, the association estimates, so the number of closures and bankruptcies in this segment could increase in 2026.
According to Russoft’s forecast, sales of Russian software on the domestic market will rise by 18% in 2026 to RUB 2.7 tn. The association also expects the software market to continue growing, although development across the sector will become less even. Large companies will retain the ability to invest and expand, while smaller developers will find it harder to maintain profitability and financial stability amid the economic slowdown.
The slowdown in investment is a broader problem affecting much of the Russian economy. Central Bank Deputy Governor Alexei Zabotkin said investment in fixed assets could remain flat or decline slightly this year.
‘They [the investments, Nezavisimaya Gazeta] peaked in real terms in 2024, and in 2025 they fell by a couple of per cent,’ he said.
According to Rosstat, investment in fixed assets fell by 2.3% in 2025 after rising 8.4% in 2024, 9.8% in 2023, 6.7% in 2022 and 8.6% in 2021, and falling 0.1% in 2020. In the first quarter of 2026, fixed-asset investment fell 14.3% year on year. The Ministry of Economic Development’s macroeconomic forecast envisages a 1.5% decline in investment this year.
The domestic IT sector continues to grow steadily, the Ministry of Digital Development said when presenting its results for the first quarter of 2026. Sales of proprietary products and services increased by 37.6% year on year. The number of employees and investment activity also increased, the ministry said, citing research by the Higher School of Economics.
Sales of proprietary products and services across the IT industry exceeded RUB 1.2 tn in the quarter. Software developers made the largest contribution, accounting for 68% of the total, or RUB 860 bln. Their sales were 1.5 times higher than in the first quarter of 2025. Companies involved in data processing and information hosting accounted for 27% of the market and increased sales by 17.4%, the Ministry of Digital Development reported
The number of specialists working in the sector also increased by 102,000 year on year, approaching 1.2 mln. The average IT salary rose 17.7% to almost RUB 235,000 in the first quarter of 2026, according to the ministry.
IT companies’ investment in fixed assets increased by 22.2% over the same period to RUB 146.9 bln. ‘Software developers made the main contribution, accounting for more than half, or 54%, of investment. Their investment was 1.7 times higher than in the first quarter of 2025, reaching RUB 78.8 bln,’ the ministry said.
It is too early to speak of an across-the-board decline in investment for the industry, experts say, because the situation varies considerably between segments. ‘A decline in investment can indeed be seen in operating systems and related office software. In mobile solutions, however, investment is at least not falling,’ says Fyodor Dbar, acting CEO of Elvis-Plus.
‘The picture is also mixed in information security. In some areas, such as protection against unauthorised access, an outflow is being recorded, but this is not due to the Central Bank’s key rate or falling demand. It is caused by the transformation of one class of solutions into another. In antivirus software, too, investment is shifting into adjacent, newer niches that may simply not be captured by conventional reporting,’ the expert continues. In his view, the main factor behind the slowdown is not the high key rate or changes to the sector’s tax burden, but the completion of the active phase of import substitution. ‘The industries that urgently needed to replace foreign software have already done so in 2022–2024. Others have longer planning horizons, so the previous intensity of growth is no longer there,’ Dbar explains. Whereas investment in 2022–2024 was more spontaneous and exploratory, as investors sought to identify promising niches, investment is now becoming more focused and targeted, he says.
‘We are seeing an investment slowdown across the domestic IT sector as a whole: investment in Russian startups fell by 10% in 2025, while private investment in the economy fell by 14.3% year on year in the first quarter of 2026. At the same time, organisations’ total spending on digital technologies rose by 11.8% to almost RUB 5.9 tn, but this growth is being driven mainly by customers rather than venture capital investors,’ says Sergey Kaparis, managing partner at Umbrella Consulting Group. ‘The cooling economy and the resulting decline in purchasing power and customer activity have already led to a substantial reduction in software companies’ profits, by about a third on average. At the same time, costs have risen: tax benefits have been cut, while price increases have created a need to index payrolls at least for key employees. In other words, investment in software development is becoming a nice-to-have. The priority is to sell existing functionality and recoup costs already incurred, while vendors are trying to develop additional product features using customers’ money,’ says Ilya Izmailov, managing director at Expanta holding.
The decline in investment raises questions about why profits have fallen, says Olga Soldatkina, a research fellow at the Institute for Industrial and Market Studies at the Gaidar Institute.
‘A combination of factors is at work in the Russian market. First, the Central Bank’s high key rate is restraining all forms of business activity. Second, in 2025 we saw a shift in business priorities. For example, amid a labour shortage, employers began investing more in competing for employees and retaining them, including at the expense of other categories of spending. Third, there is a natural normalisation after the investment boom of 2021 and the growth that continued under tightening conditions in 2022 amid increased demand for domestic software,’ she explains
The experts also note that although software development accounts for 67% of IT industry revenue, data from a single segment cannot be used to assess the investment situation across the entire IT sector. ‘An investment downturn amid fiscal and economic pressure may be occurring across all segments, including video games, microelectronics, cloud services and data-centre services, but the scale and nature of the decline differ. In capital-intensive infrastructure segments such as data centres, for example, the downturn is reflected in slower commissioning of new capacity. In 2025, 5,300 racks were commissioned, twice fewer than in 2024,’ Soldatkina says
‘As surveys show, we have not yet developed equivalents of US venture capital funds. Our companies are their own investors: 83% of all investment comes from their own funds. Companies therefore invest only when they anticipate profit growth sufficient to cover that investment. If they do not see demand growth, they do not take on new risks and instead focus on improving sales,’ says Finam analyst Leonid Delitsyn.
Nevertheless, growth drivers remain in the Russian IT market. ‘Import substitution is proceeding gradually, and the domestic solutions market has not yet reached saturation. On average across economic sectors, Russian software accounts for 40% of solutions, while only 2% of Russian companies have completed a full transition to domestic software,’ Soldatkina notes.
‘The main positive growth factors lie in the macroeconomic outlook for 2027–2028 and technological resilience. For example, the deadline for import substitution in critical information infrastructure expires in 2028. By then, the service life of equipment purchased in 2022–2023 will also be coming to an end,’ says Igor Kheres, director of asset management and M&A at Solar. ‘Demand from the government and the largest companies could become another growth driver. They can act as anchor customers, help new solutions undergo testing, secure their first major contracts and then scale them across regions and industries,’ adds Ivan Lapshin, programme director at the Digital School of Public Administration Centre at the Presidential Academy.
ORIGINAL: NG/The Period of Explosive Growth in Russia’s It Sector Is Over
