India's IT services companies are reporting a larger share of revenue from helping businesses adopt AI, marking a potential turnaround for the $300bn sector after earlier fears the technology would cause damage. Tata Consultancy Services and Infosys, two of the world's largest outsourcers, stated in their recent earnings reports that AI integration work now accounts for more than 10 per cent of their total revenue. At TCS, AI revenue in the three months to the end of September rose nearly 20 per cent from the previous quarter, while at Infosys it grew 29 per cent, even as the group cut its overall revenue growth forecast for the year.
Other companies also reported rising revenue from AI services this month. K Krithivasan, chief executive of TCS, stated that "AI continues to scale as a structural growth opportunity." The earnings have boosted Indian IT services shares, with the Nifty IT index rising more than 16 per cent this month after declining 27 per cent from the start of the year until early October. The sector had previously underperformed the broader market as cutting-edge products from Anthropic and Open AI were seen as threats.
However, the rise of cheaper models has increased the pace of AI adoption, giving outsourcers an opening to consult companies on technology incorporation. International clients are only just starting to build the foundations of their AI systems, giving IT services companies a long runway for more work. The industry remains India's largest white-collar employer.
Despite the positive signs, analysts warn of caution. Infosys cut its annual revenue forecast growth more than expected, pushing shares down 1.2 per cent. Analysts note the sector is still reaching a stage where over-expectation may occur, and that modernisation work is needed before fully agentic layers within enterprises can be achieved.
Source: Financial Times Companies · Summarized by HeadlinesBriefing