Artificial Intelligence Weighs on Deal Values and IT Revenue Growth in FY26

India's IT Services Firms See AI-Led Efficiencies Compress Deal Values and Revenue Growth

India's top IT services firms, including Infosys, Tata Consultancy Services, and HCLTech, added more large clients and closed strong deals in the fiscal year 2026 (FY26). However, this momentum failed to translate into revenue growth, as AI-led efficiencies began to compress deal values and stretch execution timelines.

The number of high-value clients continued to rise across companies. Infosys increased its $100 million-plus client count to 41 in FY26 from 39 a year earlier, while $50 million-plus clients rose to 88 from 85. Tata Consultancy Services saw its $100 million-plus clients rise to 66 from 62, and $50 million-plus clients to 139 from 136. HCLTech also reported expansion across client tiers, including gains in its top-end accounts.

Despite the growth in high-value clients, revenue growth across the sector remained muted, with most Tier-I firms reporting low single-digit growth or contraction in constant currency terms for FY26. The disconnect is becoming more visible as AI begins to show up as a measurable revenue stream.

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The AI revenue growth is not yet offsetting broader pressures, indicating that AI is contributing to revenue, but not yet lifting growth. Management commentary across companies points to a shift in deal economics. HCLTech CEO C Vijayakumar noted that AI is directly affecting deal values, with AI deflation potentially ranging from 2 to 3 percent a year. Infosys CEO Salil Parekh acknowledged a similar trend, pointing to "compression" driven by productivity expectations from clients.

Despite these shifts, demand indicators remain strong. At Tata Consultancy Services, management highlighted strong deal momentum and client additions across revenue buckets, even as full-year growth declined. Tech Mahindra's deal wins rose to $3.79 billion in FY26, up more than 40 percent year-on-year, even as constant currency revenue growth stood at just 0.6 percent.

The FY26 data points to a break in the traditional relationship between client expansion and revenue growth. With AI improving productivity, contracts becoming outcome-linked and execution moving to phased models, revenue is being spread out over time and compressed in value. This structural shift in the growth model is expected to have a lasting impact on the industry.

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