Indian IT leaders divided over duration of AI revenue deflation

What Indian IT leaders say about AI revenue deflation

India's top technology services exporters are divided over how deeply artificial intelligence is cutting into traditional software revenues, even as the sector demonstrates strong adaptiveness to next-generation tech.

During their second-quarter earnings briefings, executives at Tata Consultancy Services, HCLTech, Wipro, and Tech Mahindra presented sharply differing timelines on when AI-driven contract shrink will ease.

Automation and generative AI tools are allowing global clients to streamline routine coding, maintenance, and software development. While this reduces the billable hours for legacy work, Indian firms are rapidly expanding their AI-native practices to capture new modernization projects and market share.

Comparing Q2 revenue and AI growth across Indian IT giants

The four major firms reported stable sequential revenue for the quarter while continuing to scale up their technology capabilities:

How executives view the shift to AI automation

HCLTech chief executive C Vijayakumar warned that revenue deflation remains an active headwind, stating the industry is still in the "early phases of deflation." The firm reported $219 million in advanced AI revenue for the quarter, up 28% sequentially.

Conversely, Tata Consultancy Services CEO K Krithivasan indicated that nearly half of the deflationary impact has already taken place. TCS has established an annualized AI revenue run rate of $3.1 billion, representing roughly one-tenth of its overall operations. Krithivasan noted that while productivity gains reduce legacy contract sizes, AI deployment creates fresh vendor consolidation and system modernization contracts.

Wipro chief financial officer Aparna Iyer highlighted that typical client contracts span two to two-and-a-half years. With the sector two years into the AI adoption cycle, she stated that renewed contracts will push the company toward an inflection curve within a few quarters.

Tech Mahindra chief executive Mohit Joshi dismissed claims of AI-led revenue loss as overdone. He argued that client expectations for AI-driven productivity mirror past technological shifts, including agile development, process automation, and corporate consolidation.

Market context and global industry trends

The shift toward AI automation extends across international markets. Accenture chief executive Julie Sweet recently noted during an analyst call that AI-driven deflation remains persistent across the global IT service industry, though it has become increasingly predictable.

Financial analysts at Bank of Baroda Capital Markets anticipate that AI integration will compress software service revenues over the next 12 to 24 months as technology providers update service models to preserve long-term client relationships. Meanwhile, Indian IT leaders continue to build advanced AI capabilities to cement the country's position as a premier global hub for high-value tech innovation.