Indian IT companies may see growth recovery from FY27 as AI spending shifts to enterprise adoption

Indian IT services companies could see a strong recovery in growth from FY27 as global technology spending shifts from building AI infrastructure to deploying artificial intelligence across enterprises, according to a report by Anand Rathi.

The brokerage said the AI investment cycle is moving into its next phase, with companies increasingly focused on implementing AI, integrating it into existing systems and generating measurable returns from their investments.

“Our core thesis is that the AI cycle is pivoting from ‘building capacity’ to ‘proving payback’,” Anand Rathi said, adding that the next phase of AI adoption is likely to be more services-driven.


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This shift could benefit Indian IT services companies, which have established capabilities in technology implementation and enterprise services. The brokerage expects technology spending that was deferred over the past few years to begin flowing back to Indian IT firms from FY27 as generative AI moves beyond experimentation and into wider enterprise adoption.

The recovery could strengthen further in FY28 and FY29, potentially creating a multi-year growth cycle for the IT services sector, it said.

Indian IT companies have faced nearly three years of weak discretionary technology spending, longer deal cycles and concerns that AI-led productivity gains could reduce demand for traditional IT services.

However, broader enterprise adoption of AI is likely to create new technology requirements, according to the report. Companies will need to invest in areas such as data preparation, system integration, AI governance, legacy technology upgrades, cybersecurity and the management of AI agents.

“AI is expanding the TAM rather than compressing it,” the brokerage said, referring to the total addressable market for technology services.

It added that falling costs of technology modernisation could also make some projects that were previously postponed economically viable, creating opportunities for IT companies in AI deployment, data optimisation and AI operations.

The shift towards AI deployment comes as global technology companies face growing pressure to demonstrate returns on their heavy investments in AI infrastructure.

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Capital expenditure by the top five hyperscalers is expected to reach about $825 billion, according to Anand Rathi. With such spending rising sharply, boards and chief financial officers are increasingly seeking clearer evidence of returns from AI investments.

Indian IT companies have already begun reporting meaningful revenue from AI-related services.

Tata Consultancy Services (TCS) has reported annualised AI revenue of $2.6 billion, while AI services accounted for 8.2% of Infosys' revenue, the report said. HCLTech and LTIMindtree have also reported growing revenue streams from AI services.

Still, the recovery is not without risks. Anand Rathi flagged pricing pressure from AI, weak global economic conditions and the possibility that automation could initially hurt lower-end IT services before companies are able to shift towards higher-value AI work.

The brokerage's outlook therefore rests on Indian IT companies being able to move up the value chain as enterprise AI adoption accelerates, turning the industry's current AI disruption into a new source of technology spending.

(With inputs from ANI)