Indian IT firms see AI demand rise as spending slows

On April 26, earnings from India’s five biggest IT services firms – TCS, Infosys, HCLTech, Wipro, and Tech Mahindra – showed a sector balancing weaker discretionary spending and geopolitical risks with rising demand for AI work.

TCS and Infosys reported stronger March quarter profit and revenue growth and said macro pressure was easing.

HCLTech guided for 1% to 4% constant currency growth in FY27 and Wipro described the business climate as a new normal.

The companies said AI is reducing revenue in some traditional services through productivity gains, though new AI projects are partly offsetting that pressure.

ICICI Direct estimated AI could cut annual legacy services revenue by 2% to 3% for the next few years.

🔗 Source: Press Trust of India

🧠 Food for thought

Implications, context, and why it matters.

TCS’s billion-dollar AI services business signals how far the shift has gone

AI demand is rising, and the business is already large.
Tata Consultancy Services (TCS) reported annualised AI services revenue of US$1.8 billion. That suggests client projects are moving past trials into broader rollouts 1.
The workforce is changing as well. TCS cut nearly 30,000 jobs in late 2025, while management tied the exits to skill gaps and structural changes rather than AI automation 1.
TCS plans to retrain about 100,000 employees each year to handle that shift 2.

AI is squeezing the decades-old billable hour model

For years, Indian IT services firms grew revenue by adding staff whose hours could be billed to clients.
AI platforms such as Anthropic’s Claude, a generative AI assistant from AI startup Anthropic, can take on tasks that IT services firms long handled, including contract review in legal workflows 3.
That pressure is nudging part of the market toward outcome-based pricing, where clients pay for results instead of headcount 4.
This could replace the classic pyramid with more of a barbell shape, leaving more senior experts and specialists but fewer junior roles 2.