Synopsis
Earnings analyses reveal a sector transitioning rapidly away from traditional effort-based delivery. AI-driven productivity is causing revenue deflation in legacy services. However, this near-term compression is being offset by a multi-billion-dollar surge in new AI-native engagements, prompting a decisive shift in client priorities from sheer scale to modular, outcome-driven contracts.Listen to this article in summarized format
Earnings analyses reveal a sector transitioning rapidly away from traditional effort-based delivery. AI-driven productivity is causing revenue deflation in legacy services. However, this near-term compression is being offset by a multi-billion-dollar surge in new AI-native engagements, prompting a decisive shift in client priorities from sheer scale to modular, outcome-driven contracts.
This paradigm shift is starkly reflected in mixed FY27 outlooks and evolving talent metrics. While TCS and Infosys signalled that the worst macro headwinds are receding, peers like HCLTech and Wipro flagged continued volatility and soft discretionary spending.
"AI may cause about 2-3% annual deflation in traditional IT services revenues for the next couple of years. Indian IT services could see an incremental AI-led TAM of USD 300-400 billion by 2030," says a report by ICICI Direct.
The country's largest IT services firm reported a 12.22% jump in its March quarter net profit to Rs 13,718 crore. Its revenue from operations for Q4 jumped 9.64% to Rs 70,698 crore. For the full fiscal year 2025-26, profit after tax increased 1.35% to Rs 49,210 crore, while revenue grew 4.58% to Rs 2.67 lakh crore.
TCS noted that the company is entering the new fiscal year with positive momentum, asserting that the bulk of recent headwinds are mostly behind them. Its annualised AI services revenue crossed USD 2.3 billion, which is over 6% of its overall revenue.
TCS CEO K Krithivasan said TCS is entering the new fiscal year with positive momentum on the back of new deal signings and asserted that a bulk of the headwinds it had experienced in the recent past are mostly behind.
Krithivasan said the impact of the West Asia crisis will be limited to the challenges faced by clients in the travel and transportation segment and those based in the Gulf region.
Infosys reported a 20.8% rise in consolidated net profit to Rs 8,501 crore in the January-March quarter, while revenue from operations increased 13.4% to Rs 46,402 crore.
For the full FY26, net profit climbed 10.20% to Rs 29,440 crore, and revenue rose 9.6% to Rs 178,650 crore.
The management acknowledged that AI is beginning to cannibalise traditional IT services but noted that this deflation is being offset by a surge in new AI-driven services.
"With the Iran war, there was a change in the economic environment, but there seem to be paths towards things stabilising. What we understand (through) talking to people in the market and the clients is that the underlying resilience of some of the economies where we have big markets is pretty good. The economies are doing well. There are good investments. AI is growing well," Infosys CEO Salil Parekh said.
HCLTech reported a 4.2% year-on-year rise in consolidated net profit to Rs 4,488 crore in Q4 FY26, with revenue rising 12.34% to Rs 33,981 crore. For the full fiscal year, the company recorded a net profit of Rs 16,642 crore (a 4.30% decline) and a revenue of Rs 130,144 crore (an 11.18% climb).
The management flagged a highly volatile demand environment shadowed by tariffs and softened discretionary spending, giving FY27 growth guidance of 1-4% in constant currency. The company noted that AI is causing a deflation of 2-3% per year in traditional segments, though its Advanced AI revenue reached USD 155 million in Q4.
HCLTech CEO C Vijayakumar termed the year as one of an uncertain demand environment.
"During the quarter, our performance came below our expectations due to softness in certain parts of our business, due to lower discretionary spend and delayed decision-making.
"Our new AI-led service offerings are getting traction in the market and are reflected in annualised Advanced AI revenues crossing USD 620 million in Q4. Our #1 priority in FY27 is to ensure the company is positioned right to take advantage of AI opportunities for multi-decade value creation," he said.
On the prolonged West Asia crisis that affected many global businesses, HCLTech said the company's exposure to the Middle East is very limited, with the region contributing only about 1% to the revenues.
Wipro reported a consolidated net profit of Rs 3,501.8 crore for the March quarter, down 1.89% year-on-year, while revenue rose 7.6% to Rs 24,236.3 crore. For the full FY26, net profit saw a marginal 0.47% increase to Rs 13,197.4 crore, with revenue standing at Rs 92,624 crore.
The firm described the current macroeconomic environment as the "new normal", marked by geopolitical and policy disruptions. The company's board also approved a mega Rs 15,000 crore share repurchase programme.
Tech Mahindra reported a 16% growth in consolidated net profit to Rs 1,353.8 crore for Q4 FY26, with revenue rising 12.6% to Rs 15,076.1 crore. For the full fiscal year, profit climbed 13.15% to Rs 4,810.9 crore, and revenue increased 7.2% to Rs 56,815.4 crore.
The company's top officials dismissed concerns that the rapid integration of AI is leading to revenue deflation, stating they see AI as a huge opportunity from a medium- to long-term perspective to drive client modernisation.
