By Aditya Agarwal 
India’s information-technology industry is entering another difficult earnings season.
The country’s largest IT services companies are expected to report weak September-quarter performance as clients remain cautious and artificial intelligence changes traditional technology spending.
The pressure is particularly important because India’s IT services industry employs nearly six million people and represents one of the country’s largest export-oriented sectors.
According to five brokerages cited by Reuters, the largest IT companies could record their weakest sequential performance in three years.
Revenue growth expectations for the top six companies range between only 0.7% and 3.5% quarter-on-quarter.
Year-on-year growth is expected to remain around 10% in rupee terms.
AI Is Changing the Traditional Services Model
The problem goes beyond weak technology budgets.
Generative AI is changing how software and business-process work is delivered.
For decades, Indian IT companies built a large portion of their business around billable employees and hours.
Clients paid for teams of engineers, analysts and consultants working on projects.
AI can now automate parts of that work.
As a result, clients increasingly expect productivity gains without proportionally increasing their technology budgets.
That creates pricing pressure.
Jefferies has described the trend as AI-led deflation, while also pointing to high oil prices and interest rates as broader macroeconomic pressures.
The result is a difficult combination.
IT companies must invest heavily in AI while simultaneously dealing with customers who expect lower costs.
Large Companies Face Different Levels of Pressure
India’s major technology companies are entering the quarter with different exposure levels.
TCS will begin the major earnings cycle on October 8.
Infosys, HCLTech and Wipro will follow later in the month.
Analysts expect organic growth to remain weak across much of the sector.
However, acquisitions and the ramp-up of previously signed projects could provide some support.
That distinction matters.
A company can report reasonable headline growth because of acquisitions while its underlying demand environment remains subdued.
Investors will therefore focus heavily on organic revenue growth and management commentary.
Margin Benefits May Not Solve the Growth Problem
Currency movements could provide some assistance.
The depreciation of the Indian rupee can increase the rupee value of overseas revenue.
However, foreign-exchange losses and hedging effects can offset part of that benefit.
Consequently, margin improvement does not necessarily mean stronger underlying demand.
The bigger question is whether Indian IT companies can change their business models quickly enough.
They are increasingly investing in AI platforms, automation, cloud infrastructure and industry-specific solutions.
Meanwhile, customers want technology partners that can deliver measurable business outcomes rather than simply provide additional manpower.
The Industry Is Moving Toward Outcome-Based Technology
This could accelerate a structural transformation.
Instead of charging primarily for the number of employees assigned to a project, technology companies may increasingly charge for outcomes, software platforms and automated services.
That transition could improve productivity.
However, it also creates short-term disruption.
If an AI system allows one engineer to complete work previously requiring several people, the immediate effect may be lower billing demand.
Over time, companies could generate new revenue from AI implementation and higher-value services.
The transition period is therefore crucial.
What Comes Next
The September-quarter results will provide an early indication of how quickly AI is affecting India’s technology-services economy.
Management commentary will be particularly important.
Investors will watch discretionary technology spending, deal pipelines, AI-related bookings and annual revenue guidance.
Meanwhile, Indian IT companies will have to balance two priorities.
They need to protect existing service revenue while building businesses around technologies that can reduce the amount customers spend on traditional services.
That tension could define India’s IT industry through the next several quarters.
Tags: India IT Sector, TCS, Infosys, HCLTech, Wipro, Artificial Intelligence, IT Services, Technology
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