AI revenues of $10-12 billion within reach of IT firms

Analysts say achieving the target hinges on net-new spending and clearer definitions

India’s IT Sector Targets $12 Billion AI Revenue in FY26

The Indian IT services industry could reach double-digit AI revenues in FY26, but the trajectory will depend on whether artificial intelligence drives incremental spending or merely reshapes existing contracts, according to analysts and industry executives FE spoke to.

At the recent NTLF Summit hosted by Nasscom, the industry body estimated that AI revenues for IT firms in FY26 would exceed $10-12 billion, with overall sectoral revenue projected to grow 6.1% to $315 billion. The projections suggest AI is moving beyond pilots and proof-of-concepts into measurable revenue streams.

Revenue Reality

Current disclosures from large firms indicate progress but also highlight the distance to the projected range. At its Investors’ AI Day on February 17, Infosys CEO Salil Parekh outlined an AI-first value framework, placing the addressable AI services opportunity at $300-400 billion by 2030. AI-led revenue accounted for 5.5% of the company’s third-quarter revenue, or roughly $280 million, he said. HCLTech reported $146 million in advanced AI revenue for the quarter, about 4% of its top line.

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Tata Consultancy Services disclosed AI revenue at an annualised run rate of about $1.8 billion. While methodologies vary, the disclosures point to AI becoming a defined reporting segment.

The lack of a common definition remains a constraint. AI components are now embedded across transformation programmes, automation layers, data modernisation initiatives, copilots and productivity projects. Pure-play AI, however, typically refers to model engineering, agentic workflows, AI platforms and outcome-based AI services. Depending on what is included, reported numbers can differ materially.

“What Nasscom is projecting is around 3-4% of that revenue being AI revenue. While the number does not appear to be too ambitious or impractical, the challenge is that, usually at an early stage of a technology adoption, a consistent methodology across IT firms to categorise their revenue from that tech does not exist. In the absence of that we have to go by whatever the firms declare… However, with the recent announcements from services firms on their AI revenue, it is not unrealistic at all,” Ashutosh Sharma, VP and research director at Forrester, said.

Phil Fersht, CEO of HfS Research, said the composition of AI revenue would matter more than the aggregate figure. If AI-led deals replace traditional services spending, growth would be defensive. “Only if it expands wallet share and creates new categories of spend, will it become structural growth. So, yes the projection is achievable. But investors will scrutinise whether it represents net-new expansion or revenue relabelling,” he said.

Leaner Delivery

Operational changes are already visible. In the first nine months of FY26, India’s top five IT firms added a net 17 employees, compared with 17,764 net additions in the same period last year. In a recent report, KKR described this as a positive signal. “In our view, this pivot towards a leaner workforce likely signals a faster shift to automated, AI-enabled delivery models than many investors had anticipated, and a trend that could ultimately spread beyond IT into adjacent services sectors,” it stated.

Executives acknowledge that delivery structures are being reworked. “Someone called it an inverted champagne glass, last I heard,” Jasjit Kang, global head of business processes at Wipro, said at a panel discussion, referring to the evolving talent pyramid. Mid-level roles are being re-skilled, and firms are focusing on improving revenue per employee.