GLOSSARY: Indian IT in Deep Waters

Indian IT in Deep Waters

THE BELAMY

WEEKLY NEWSLETTER OF AIM

Monday, Apr 28, 2025 | By Mohit Pandey

Let's not sugarcoat it anymore. Indian IT is teetering on uncertain legs as it enters FY26, and the AI hype isn't doing much to steady it. After two years of flatlining growth, the $280 billion industry now faces a perfect storm: trade tensions, project delays, client caution, and a credibility crisis around AI.

The big four—TCS, Infosys, Wipro, and HCLTech—all dropped their Q4 numbers recently, and frankly, they didn't inspire much confidence.

TCS missed both margin and profit estimates. Infosys couldn't meet its own raised guidance for FY25, falling short at 4.2% growth versus the guided 4.5–5%. Wipro just went ahead and predicted negative growth for the first quarter of FY26.

What is Happening Though?

K Krithivasan, CEO of TCS, summed up the situation best: "Improving market sentiment and revival of discretionary spending have not been sustained due to tariff discussions. We are observing delays in decision-making and project starting."

Basically, deals are being discussed, but nobody's pulling the trigger.

Although TCS doesn't provide guidance, revenue for this quarter stood at $7.4 billion, representing a nearly flat 0.8% rise, which is concerning.

Wipro & Infosys have gone cold

Infosys is already waving the caution flag, saying growth will remain soft and the consumer sector will take a hit. CEO Salil Parekh said that while energy, utilities, and BFSI are still going strong, the overall environment remains "uncertain".

With the Q4 weakness and negative revenue growth, Infosys provided growth guidance of 0–3% in constant currency, citing a volatile macro environment.

Wipro is straight-up bracing for a drop in revenue. The revenue from operations was nearly flat for the quarter. Now, with the guidance of -3.5% to -1.5% for Q1 FY26, they're banking on ramping up later, especially from their massive Phoenix deal.

"We'll see the revenue tick once the contract kicks in," said CEO Srini Pallia. But until then? Nothing.

Before we delve deeper into this, let's take a look at some of the top stories of the week.

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In an exclusive interaction with AIM, L Venkata Subramaniam, IBM's Quantum India leader, offers a ground-level view of how global tech meets national ambitions in the subcontinent's quantum leap. Click here for the full interview.
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In another major news this week, the government of India has selected Sarvam AI to develop India's sovereign LLM under the IndiaAI Mission.

Sarvam AI has proposed the development of a 70-billion parameter multimodal AI model that supports both Indian languages and English, and work on it has already begun. Cheers to that!

Coming back to Indian IT, HCLTech and Tech Mahindra's Q4 was slightly brighter, but still cloudy. HCLTech's profit was down 6.2% QoQ and revenue barely moved. But at least they're trying to be optimistic, projecting 2–5% growth for FY26, which is also not so great.

CEO C Vijayakumar pointed to GenAI as a silver lining: "GenAI is becoming a core element of nearly every deal," he said. But, he admitted that discretionary spending remains low and that macroeconomic factors like tariffs and de-globalisation will continue to sting.

Tech Mahindra also posted flat revenue growth for the quarter, but a 1.2% decline QoQ. However, it recorded a 77% rise in profit for the quarter. The company expects to lift margins beyond 15% by the end of FY26, but has not provided specific guidance for the year, which is unfortunate.

If Q1 continues this way, Indian IT will have even bigger trouble on its hands.

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"As AI generates more of our code, the bottleneck shifts from writing to reviewing. This new reality makes AI-powered code review valuable and essential for modern development teams," Harjot Gill, CEO at CodeRabbit, said. Click here to read the full story.

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Coming back to Indian IT, GenAI is a washout for them

We have been tracking Indian IT's 'GenAI' quarterly results for a couple of years now—sadly, nothing much has changed. Though this year, everyone said that AI is in every deal conversation and announced hundreds of client projects, nothing substantial has come out yet, not even in revenue.

TCS has announced $12.2 billion deal wins with AI being part of it, Infosys said 400 AI projects are on the way, HCLTech announced 12 exclusive GenAI deals, and Wipro secured 17 big wins with AI. However, for all of them, this didn't bode well, as revenue was mostly down for all, despite a year of AI deals.

Compare this with Accenture. In the same environment, the global giant reported $1.4 billion in GenAI bookings in just one quarter, with a massive chunk of revenue from it.

With 6.7% of its total order bookings and despite a QoQ revenue decline, Accenture's confidence should show some light to Indian IT.

TCS specifically has taken a U-turn on this. Three quarters back, it claimed a $1.5 billion GenAI pipeline, which hasn't turned into tangible growth till now and this time, it refused to reveal direct generative AI numbers.

So yeah, the contrast is glaring.

Click here to read how Indian IT is AI washing.

Vijayakumar of HCLTech had warned us about this downfall earlier. Indian IT's linear growth model of the past—more people equals more revenue—is breaking down. It is time for Indian IT to rethink its 30-year-old business model or risk becoming obsolete.

Infosys' Parekh echoed this "paranoia" and called for a non-complacent approach. AI was seen to steer the path ahead for them to remain relevant in the race, but it doesn't seem to be happening.

Last week, Zoho's Sridhar Vembu raised red flags on the dismal Q4 earnings from top IT firms, calling it a "total washout". Meanwhile, CP Gurnani, former CEO of TechMahindra, believes that this is recoverable and "the pain is temporary".

Adding to the list of challenges is the rise of GCCs. Some firms are reportedly reducing their dependence on IT contractors, slashing outsourced work. That's a massive hit to firms like TCS and Infosys.

Right now, Indian IT finds itself in a strange bind. We might see more cautious forecasts, more flat quarters, and a lot more AI jargon flying around.

Let's just say—Indian IT has some soul-searching to do as it expects revenue from generative AI this year.

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