Synopsis
Decline in annual revenue runs at even the biggest in Indian IT, such as Tata Consultancy Services (TCS) and Wipro, despite healthy deal pipelines suggests persistence of both slow revenue conversion and discounts spawned by competition from AI, analysts said.Listen to this article in summarized format
TCS reported a 2.4% drop in constant currency terms in its annual revenue in FY26, while the fourth largest service provider, Wipro, reported a 1.6% drop. For Wipro, this is the third year in a row where it has posted an annual decline.
This was despite growth in both their total contract values (TCV). While TCS recorded a TCV of $40,7 billion, up 3.2% year-on-year, Wipro posted a TCV of $16.4 billion, up 14% YoY.
Since AI has been entrenched in all the conversations,” we see lots of firms promising significant discounting on different things in managed services that they are happy to sign up on, just in the hopes of larger contracts,” said Akshat Vaid, partner at US consultancy and research firm Everest Group.
Such discounts and benefits shared with clients offset whatever productivity gains service providers make, and dent the revenue ultimately earned from them, he said.
“What that means is that everybody (service providers) now recognises if they don’t offer the discounts themselves, somebody else is going to come and do it on their behalf, leading to cannibalisation of their revenue,” Vaid added.
On TCS, analysts at Motilal Oswal pointed out that the company recorded modest incremental gains despite currency-led tailwinds and AI-led productivity gains. “We believe a muted demand environment and AI deflation are sucking up all productivity benefits,” the brokerage said.
ICICI Securities noted on Wipro that “the disconnect between deal bookings growth and revenue growth could be due to higher AI-led deflation and market share loss,” while Motilal Oswal said that near-term visibility remains limited due to ramp-up delays and seasonality.
Additionally, a decline in application development and management contracts (ADM) is adding to the drag on IT firms’ revenue from managed services. According to data from global technology research and advisory firm Information Services Group (ISG), contract values for ADM have contracted by 20% in the first quarter of 2026 (ISG reports according to the calendar year).
The average contract values for board-based managed services have also declined for the third quarter in a row, signalling the deep discounts in its pricing.
“Since cost optimisation is a priority for clients, vendor consolidation has been a priority for enterprises - allowing some providers to deepen relationships or expand scope. Additionally, pricing pressure is causing some deals to be smaller,” said Namratha Dharshan, chief business leader, ISG.
There is still ambiguity in terms of AI pricing and the associated outcomes that providers can offer. Clients are approaching this cautiously and seek clarity before signing up, leading to longer renewal or sign-up, leading to slower revenue conversions, Dharshan added.
