Synopsis
India's leading IT firms are seeing revenue per employee rise. This indicates a shift towards AI and automation driving productivity. Companies like Tata Consultancy Services, Infosys, HCLTech, and Tech Mahindra reported growth. This trend suggests a move away from headcount-based revenue models. The industry is adapting to a new era of efficiency and value creation.Listen to this article in summarized format
Assembly Elections 2026Election Results 2026 Live Updates: Who's ahead in which stateWest Bengal Election Results 2026 Live UpdatesTN Election Result 2026 Live Updates
Tata Consultancy Services, Infosys, HCLTech and Tech Mahindra posted 3-4% rise in their annual revenue per employee (RPE) – a metric to measure productivity levels – data from their FY26 financials. Wipro, though, saw its RPE decline for the year.
“This is one of the clearest indicators that the industry is entering a services-as-software phase,” said Phil Fersht, chief executive of US-based IT advisory firm HfS Research. “Revenue per employee increasing while hiring slows tells you that value creation is shifting from people hours to platform, automation, and AI leverage.”
The increase in productivity numbers comes along as the tier-1 companies reported a net reduction of nearly 7,000 employees in the fiscal year, as mounting costs and AI-led productivity pressures led to muted hiring.
“This creates a barbell workforce, fewer people overall, more junior intake at the bottom, and a sharper focus on high-end AI, consulting, and domain talent at the top,” Fersht said, highlighting that this represents an early phase of an AI-shaped workforce, where not scale, but productivity is the primary advantage.
The four firms had posted an average of 2%-2.5% rise in RPEs in FY25 when the tier-1 companies witnessed a net addition of 12,718 employees.
Industry watchers said a combination of factors, including higher utilisation rates and AI-led efficiency, is pointing to decoupling of headcount and revenue growth.
“The industry is gradually shifting from a linear, headcount-linked revenue model to a platform-based approach,” said Kumar Rakesh, IT & auto analyst at BNP Paribas, India. “Under this model, firms bill for third-party models and agents, their own intellectual property, agents and employee services. Consequently, revenue growth is decoupling from employee growth.”
TCS, for instance, despite shedding 2% of its workforce, posted an increase of 3.4% in RPE, while HCLTech reported the highest gain, at 4.1%, even as its headcount increased year-on-year.
“The rise in revenue per employee is partly a function of lower headcount, but more importantly reflects structural productivity gains,” said Kapil Joshi, chief executive of IT staffing at Quess Corp. “Data shows utilisation improving, offshore mix increasing to 80–85%, and automation and platformisation stabilising margins. These changes enable firms to deliver more with fewer people.”
Utilisation levels increased to an average of 85%, up from 80% around two years ago, as employment models became less flexible, boosting billable productivity for IT firms. Simultaneously, bench levels have dropped to 8-15% of the workforce at IT companies, down from around 20%, according to an ET report in March.
However, the contribution of AI to the growing productivity of the workforce is still limited, experts said, with the RPE growth reflecting more seasonality rather than being a secular trend.
“Revenue per FTE (full-time equivalent) matrix fluctuates for several reasons, and it typically expands during a period of caution when hiring is muted, utilisation increases and service providers leverage subcontractors more than usual (which doesn’t show up in RPE math directly). The current trend seems to be a reflection of this,” said Jimit Arora, chief executive officer of US-based tech consultancy firm Everest Group.
“We expect to see a secular trend of AI-induced nonlinearity emerging in the medium to long term. There is an unsaid expectation of hitting $100K/FTE from current levels,” he added.
While RPE is the most direct indicator of the industry’s changing revenue model, the present RPE uplift does not yet constitute a clear AI-driven growth story, BNP’s Rakesh said.
The upward trend is expected to accelerate as the revenue mix continues to shift towards platform-based earnings.
