Indian IT services groups gain from AI integration demand

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Indian IT gains from AI integration

Highlights

Tata Consultancy Services and Infosys report AI integration contributes over 10% of total revenue, with quarterly AI-related revenue growth of 20% and 29% respectively.
The Nifty IT index rebounds over 16% in October after a 27% decline earlier in 2023, supported by strong earnings and increased enterprise AI adoption.
India's 24 listed IT services firms have added more than 31,000 jobs since April, doubling prior hiring rates, yet Infosys lowers full-year revenue growth guidance.

AI work becomes a bigger revenue driver

As reported by the Financial Times, Tata Consultancy Services and Infosys say AI integration work now contributes more than 10% of total revenue, an early indication that India’s outsourcing sector is finding new growth avenues as enterprise adoption expands.

At TCS, AI revenue in the three months to the end of September rises nearly 20% from the previous quarter, while Infosys records 29% growth. Other technology services groups also report higher revenue from AI-related work this month, with TCS chief executive K Krithivasan saying AI continues to scale as a structural growth opportunity.

The improvement comes after a period in which advanced products from Anthropic and OpenAI fuel worries that India’s largest services industry could lose relevance. Instead, the spread of cheaper models is increasing the pace of adoption and creating new consulting and implementation work for outsourcers as companies build AI systems into their operations.

Sector analyst Kumar Rakesh of BNP Paribas says sentiment at the start of the year suggested these companies might have little role in AI, but that view is now changing as their position in deployment and integration becomes clearer.

Share rebound and hiring support outlook

The earnings updates help drive a strong recovery in IT stocks, with the Nifty IT index rising more than 16% this month after falling 27% from the start of the year to the beginning of October. The rebound matters for India because the IT services industry is the country’s largest white-collar employer and remains important for investor confidence.

Tech Mahindra chief executive Mohit Joshi says many international clients are only starting to build the foundations of their AI systems, leaving a long runway for further work. He says enterprise AI adoption remains at an early stage because substantial modernisation is still needed before companies can deploy fully agentic layers that allow AI systems to complete tasks with minimal human intervention.

Hiring is also picking up as contracts increase. India’s 24 listed IT services companies have added more than 31,000 jobs since April, according to research by Mumbai-based portfolio manager Vallum Capital, double the hiring recorded in the full fiscal year to the end of March 2026.

Even so, analysts urge caution. Infosys cuts its annual revenue growth forecast by more than expected despite narrowly beating quarterly revenue expectations, and its shares are down 1.2% since Friday. Rakesh warns investors may begin to overestimate how quickly AI-related gains can offset the industry’s broader challenges.

We previously reported on Wipro’s stronger-than-expected quarterly performance, as steadier client spending—especially from Europe—helped lift revenue. That update also highlighted how artificial intelligence services are starting to create new revenue streams for major Indian IT providers, alongside their traditional outsourcing work.

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