Inside the Story
- India’s major IT companies are entering the September quarter with subdued growth expectations.
- AI-led productivity and pricing pressure are changing the traditional IT-services business model.
- Cautious spending by global clients is adding to demand uncertainty
- Upcoming Q2 results will provide fresh signals on AI-driven transformation and IT-sector growth.
The Story
Introduction
India’s information technology sector is heading into the September 2026 quarter earnings season under pressure from artificial intelligence, cautious client spending and changing technology budgets. Major IT-services companies, including Tata Consultancy Services (TCS), Infosys, HCLTech and Wipro, are expected to report another relatively subdued quarter as businesses continue adjusting to the rapid adoption of AI.
A Reuters report published on October 1 said analysts expect the top Indian IT companies to experience weak quarterly growth, with AI-driven pricing pressure and cautious client spending weighing on performance. The report also noted that the traditional billable-hours model is coming under pressure as AI allows some technology work to be completed more efficiently.
It is important to note that these are analyst expectations, not final company results. The September quarter ended on September 30, and companies will announce their financial results over the coming weeks. Infosys, for example, has scheduled its September-quarter results for October 23, 2026.
Background: India’s IT Services Model
India has built a large global technology-services industry around software development, consulting, business-process services, cloud migration and technology support. Companies such as TCS, Infosys, HCLTech and Wipro serve clients across sectors including banking, healthcare, retail, manufacturing and telecommunications.
For decades, a significant part of this business has been based on the number of professionals working on projects and the hours required to deliver those services.
Generative AI and other automation technologies are beginning to change that model.
AI tools can assist developers with coding, automate repetitive tasks, analyse large datasets and support software testing and customer-service operations. This can potentially allow companies to complete some projects with fewer hours of manual work.
That creates both an opportunity and a challenge for Indian IT companies. They can use AI to deliver services faster and develop new AI-related offerings, but customers may also expect productivity gains to translate into lower costs.
Main Development: AI Changes the Earnings Equation
The September-quarter outlook reflects this transition.
According to Reuters, five brokerages expect the six largest Indian IT companies to record quarterly revenue growth of roughly 0.7% to 3.5% sequentially, while year-on-year growth is expected to be around 10% in rupee terms. Reuters also reported that analysts expect organic growth to remain weak for many companies.
Economic Times reported similar expectations, noting that AI-led revenue deflation, pricing pressure and weak demand are likely to limit growth. Analyst estimates cited by the publication put TCS’s organic revenue growth at about 0.5% sequentially and Infosys at around 1.1% sequentially for the September quarter.
Brokerage JM Financial has also described the quarter as subdued, citing continued demand uncertainty, AI-led productivity pressure and increased competitive intensity among large Indian IT companies.
The pressure does not mean AI is simply reducing business opportunities for IT companies. In fact, AI transformation itself is becoming an important source of revenue.
TCS reported in its June 2026 quarter that its annualised AI revenue had reached $2.6 billion, up 13.6% sequentially. The company also reported several AI-led transformation deals, including an $800 million deal with SKF.
This highlights the central shift taking place in the industry: companies are increasingly trying to move from traditional technology outsourcing toward AI transformation, cloud, data and automation services.
What Global Clients Are Doing
Client behaviour remains another important factor.
Many global companies are carefully managing technology budgets because of economic uncertainty, interest rates and changing business priorities. At the same time, they are increasing spending in selected areas such as AI infrastructure, automation and digital transformation.
For Indian IT companies, this creates an uneven environment. A client may reduce spending on traditional application maintenance while increasing spending on AI implementation or cloud transformation.
Reuters reported that macroeconomic conditions, including high oil prices and interest rates, are also contributing to uncertainty around technology spending.
This means that the upcoming earnings season will not only be about revenue numbers. Investors and businesses will also be watching what IT companies say about AI demand, new contracts, pricing, margins and future technology spending.
Industry Impact
The changing IT landscape could have significant implications for India’s technology-services industry and its workforce.
For businesses, greater AI adoption could reduce the time and cost required for certain software and technology projects. Companies may increasingly seek vendors that can combine AI capabilities with cybersecurity, cloud computing, data management and business consulting.
For Indian IT-service providers, the challenge is to demonstrate that AI can generate new sources of revenue rather than simply reduce the amount clients spend on traditional services.
The workforce is also likely to experience changes. As repetitive tasks become increasingly automated, demand could shift toward employees with skills in AI, data engineering, cloud computing, cybersecurity and specialised industry knowledge.
India’s IT sector employs millions of people, making this transition particularly significant for the country’s broader employment and services economy. Reuters estimates the sector’s workforce at nearly six million people.
What to Watch in the Q2 Results
The upcoming earnings announcements should provide a clearer picture of how quickly AI is affecting India’s IT-services business.
Key areas to watch include:
- Revenue growth – whether client spending is beginning to recover.
- AI revenue – how much new business is coming from AI transformation.
- Pricing – whether AI productivity is leading to lower project prices.
- Deal wins – the size and nature of new technology contracts.
- Margins – whether productivity improvements translate into better profitability.
- Management outlook – what companies expect from global technology spending in the coming quarters.
TCS has already announced that its board will meet on October 8, 2026, to consider the company’s September-quarter financial results.
Conclusion
India’s IT sector is entering an important period as artificial intelligence changes how technology services are delivered and priced. The immediate September-quarter outlook remains cautious, with analysts expecting subdued growth for several major companies.
However, the industry’s story is not simply about declining traditional IT demand. AI is simultaneously creating new opportunities in transformation, automation, cloud and data services.
The upcoming Q2 results will therefore offer an important look at whether Indian IT companies can successfully turn the rapid adoption of AI into sustainable business growth while managing pressure on their traditional services model. For eRoof readers, the results could provide useful signals about where India’s technology industry—and the skills and businesses supporting it—is heading next.
Technical Points
AI-Driven Pricing Pressure
AI automation can complete some software and technology tasks faster, which may push IT companies to reduce prices or deliver more work for the same contract value.Generative AI
Generative AI creates text, code, images, or other content from prompts. IT companies are increasingly using it to improve software development, testing, customer support and business processes.AI-Led Productivity
AI tools can automate repetitive tasks and help employees complete projects faster. Higher productivity can reduce the number of manual hours required for certain IT services.Billable-Hours Model
Traditional IT outsourcing often charges clients based on the time employees spend working on a project. AI can challenge this model because automation may reduce the number of hours needed.AI Transformation Services
These services help businesses introduce AI into existing operations, software and workflows. They can include AI strategy, automation, data systems and deployment of AI applications.Cloud Computing
Cloud computing provides computing power, storage and software through internet-based infrastructure. It is important for AI because businesses often need significant computing resources to develop and run AI systems.Sequential Revenue Growth
This measures a company’s revenue compared with the immediately preceding quarter. For example, September-quarter revenue is compared with June-quarter revenue to determine quarterly growth.Q2 Earnings Results
Q2 results show a company’s financial performance during the second quarter of its financial year. Investors and businesses examine revenue, profits, margins, deal wins and management guidance to understand the company’s performance and outlook.