‘AI deflation’ comes to India’s tech services giants and puts downward pressure on revenue
Headcounts, however, are mostly holding up
AI is beginning to make a dent in the business models of India’s big four technology services giants
Infosys, HCL, TCS, and Wipro have all announced quarterly results in the last ten days, and all had mixed news.
HCL, for example, told investors annual revenue grew 11.2 percent for FY 2026, and headcount rose almost two percent. But the company also pointed to “AI deflation” that CEO C. Vijayakumar explained means future revenue will dip between three and five percent in the coming year, and perhaps further in the future.
Infosys CEO Salil Parekh said he expects deflation to become a factor in the future, but predicted the company will continue to grow this year after last year brought 3.1 percent revenue growth.
Wipro CFO Aparna Iyer pointed to lower margins in some deals, and a need “to drive operational improvement that is a continuous process” despite the company posting four percent annual revenue growth.
TCS saw annual revenue slip 0.5 percent year-over-year and CEO K Krithivasan admitted he’s also seeing deflation – which he called “degrowth.”
Krithivasan also said he believes AI will help the company to grow revenue over time, and pointed to new wins that use the tech
“For an electronics manufacturer, in their fabrication facilities, we are integrating NVIDIA Omniverse-driven digital twins with autonomous quadruped-based inspection systems,” he said on the company’s earnings call. “This physical AI solution is driving better construction accuracy and proactively identifies safety hazards.”
His CEO peers had similar stories, related to winning deals involving AI tech or serving the AI industry.
HCL’s C. Vijayakumar pointed to the company winning a deal to use its in-house AI tools to modernize a European industrial engineering and manufacturing company’s IT infrastructure and application estate. He also mentioned work at a “US subsidiary of a global memory semiconductor group that powers next-generation AI factories and hyperscale data centers worldwide” which picked HCL for “end-to-end firmware development and sustenance services, helping strengthen the reliability, performance and scalability of clients' high-performance storage platforms.”
Infosys pointed to ugly footwear company Crocs using its AI to optimize operations and reduce costs. CEO Salil Parekh, however, said that most of the company’s customers see AI as an opportunity to improve productivity.
The four services giants all see agentic AI as essential to their futures, and are working to productize agents so they can make them part of their practices.
Wipro’s Aparna Iyer thinks AI can help her company “to deliver our fixed-price programs better” – which if executed successfully might just help to defray that deflation problem.
The four services giants each employ over 200,000 people and their hiring and firing patterns are often considered an indicator of the sector’s health. Headcount has moved by a few percent across the companies, but none has made swingeing job cuts to match those implemented by US tech giants as they try to cover the cost of investing in AI infrastructure and adopt the technology. ®