Chandrasekaran, chairman of Tata Consultancy Services in India, warned shareholders earlier this year that the company could eventually have as many AI agents as human employees. “The day is
Chandrasekaran, chairman of Tata Consultancy Services in India, warned shareholders earlier this year that the company could eventually have as many AI agents as human employees. “The day is not far when the company will have half a million AI agents,” he said at TCS’s annual general meeting in June, describing a future where AI agents and employees work side by side.
That prediction is now starting to look less like a general idea and more like a business reality for India’s IT industry. TCS ended FY2026 with 584,519 employees, down from the previous year, while its annualized AI revenue had already crossed $2.3 billion. By the June quarter, that AI revenue figure had risen to $2.6 billion, even as revenue growth remained modest.
The pressure is now spreading across India’s biggest IT companies. TCS, Infosys, HCLTech and Wipro are heading into another weak earnings quarter as AI-driven pricing pressure combines with cautious client spending. Five brokerages expect the country’s six largest IT firms to post their weakest quarterly performance in three years, with sequential revenue growth of just 0.7% to 3.5%.
Source: Reuters
The problem is bigger than weak demand. AI is changing how much work clients need to buy and how much they are willing to pay for it. India’s roughly $315 billion IT services industry has traditionally relied heavily on billing clients for the hours worked by large teams. As AI allows some of that work to be completed with fewer people, that model is coming under pressure. Jefferies said AI-led deflation still has further to run, while higher oil prices and interest rates are adding to the strain.
Executives across the industry have warned that AI could weaken the traditional model of selling software services by the hour, because clients can use AI to get the same work done with fewer people. That makes the current earnings pressure more than a short-term slowdown in technology spending. It points to a change in how IT companies make money.
Srikrishna Ramakarthikeyan, CEO of Hexaware Technologies, put a clear number on that change in August. He said AI could reduce the price of some routine IT projects by 20% to 25%, as clients demand lower fees when fewer employees are needed to complete the work. The warning is particularly relevant to India’s IT sector, where large workforces and billable hours have traditionally driven revenue.
Source: Bloomberg
Meanwhile, the potential scale of that productivity is even larger, according to Jimit Arora, CEO of Everest Group. He has said AI is producing productivity gains of 30% to 70% in some services. If a project that once required 100 hours can be completed in 50, an IT company cannot assume it will continue earning for all 100 hours simply because the client still receives the same result.
Phil Fersht, CEO of HFS Research, has made a similar argument about the industry’s revenue model. He has warned that AI could weaken traditional revenue growth because companies need fewer billable hours to produce the same output. That puts pressure on IT firms to move toward pricing based on outcomes rather than the number of people or hours assigned to a project.
The pressure brokerages are describing in India isn’t isolated to India, it’s playing out in other different countries, in the same earnings season.
In the United States, Accenture cut its fiscal 2026 revenue growth forecast from a 3 to 5% range down to just 3 to 4%, and its stock fell 18% in a single session on the news. CEO Julie Sweet told CNBC that “AI scaling will take some time.”
Cognizant, another US based firm, is restructuring how it charges clients so that fixed price and outcome based contracts crossed 50% of its revenue for the first time this year, an attempt to stop billing by the hour and instead get paid for what AI actually delivers.
In France, Capgemini is buying AI capacity outright through acquisitions of firms like WNS and Cloud4C. In the US, IBM’s infrastructure revenue fell 7% in the same quarter, with its IBM Z mainframe line down 42%, as the company watched client budgets shift toward AI spending instead of the hardware and services IBM has sold for decades.
Meanwhile, Microsoft Chairman and CEO Satya Nadella said India could have the world’s largest developer community by 2030, showing the country’s growing pool of technology workers as a major advantage in the AI race.
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