Yes, could be IAC Valve if it is older.
IAC Valve uses a Stepper motor, the computer can send it voltage pulses, like Morse Code, to call one of its 100 "steps".
Step 1 might be rotate 5deg
Step 30 might be rotate 260deg
Step 80 might be rotate 400deg
Each Step opens, or closes, the air valve a specific amount, the computer "learns" what steps set what RPM.
The computer gets the RPMs from the distributor and TFI module.
But it is odd that the computer is not raising the idle back up after it drops, it may be trying to and the IAC Valve is simply not responding.
IAC Valve could also be losing power, IAC Valve closes all the way when key is off(no power), check the wiring at the connector.
When engine is cold the computer opens IAC Valve more, to set idle at 1,000rpms or a bit more, it is temperature based.
As engine warms up computer closes IAC valve more and more corresponding to the the engine/coolant temp, until "Target" RPM for warm engine is set, manual trans target is usually 600-650, automatic 750-800.
ECT(engine coolant temp) sensor is how the computer gets the engine temp, this is a TWO WIRE sensor only used by the computer, dashboard temp gauge uses a ONE WIRE sender, these look similar but are not shared.
I wouldn't think the ECT sensor could cause the drop in idle since idle drops below target idle, if idle was going up then maybe.