The recent correction in global AI-linked technology stocks largely spared Indian IT companies, thus signalling a shift in investor sentiment. Rather than viewing AI solely as a threat to the services sector, markets are beginning to recognise that enterprise AI adoption is likely to be slower and more services-intensive than initially expected. According to analysts, this may have created fresh opportunities for IT firms in consulting, integration and governance.
“The movement clearly demonstrated that while investors are mainly rotating out of crowded AI trades, they may have become too pessimistic about the services sector,” Phil Fersht, founder and CEO of HFS Research, told Fe.
Analysts said that the recent rally should not be interpreted as the start of a broad-based revival for the IT services sector. Instead, it should be viewed as a recalibration of expectations after markets overestimated the pace of AI’s disruption of traditional outsourcing. Enterprise adoption continues to be held back by data readiness, governance, integration and security challenges, leaving system integrators with a significant role to play.
“The Nifty IT index has seen an upward trend over the past month, recovering from its 52-week low in early July. While a month is too short a duration to call this a structural resurgence, it is definitely a step in the right direction for the sector,” Saikat Banerjee, partner and leader of Bain & Company’s AI, insights and solutions practice in India, said.
Investors are also becoming more selective. Cognizant’s latest quarterly results reinforced the view that companies demonstrating credible AI execution are likely to be rewarded over those relying on conventional services growth alone.
“The reaction to Cognizant’s results is a good example of this, where the market rewarded improving execution and a more credible AI transformation story rather than simply another quarter of conventional services growth,” Fersht said. “This is not Wall Street deciding that the old model is healthy again. It is recognising that selected services firms can use the strengths of the old model to build the next one.”
The next phase of AI spending is increasingly shifting from building large language models and infrastructure to integrating AI into enterprise operations, an area where IT services firms already have established client relationships.
Gaurav Parab, IT research analyst at NelsonHall, said leading companies are redesigning delivery models around AI, particularly in software testing, where AI agents are automating test generation, execution and defect analysis while engineers focus on governance and quality assurance. As these operating models mature, firms are expected to improve productivity and protect margins.
The scale of AI investment is also expected to create fresh demand for services. HFS Research estimates hyperscaler AI capital expenditure will reach $700 billion in 2026, while nearly three-fourths of enterprises are replacing or planning to replace parts of traditional services with AI-led solutions. That is expected to drive spending on data modernisation, integration, governance and security, although it will also increase pressure on providers to pass on AI-led productivity gains through lower pricing and leaner delivery teams.
“The pivot that makes sense for the IT sector is consulting, helping large companies reorient their existing workflows and products to be AI-first,” according to Sandeep Khomne, partner at Asterial Technologies. As enterprise adoption of AI agents accelerates, analysts say the biggest winners will be firms that can move beyond implementation to orchestrating AI deployments and delivering measurable business outcomes, rather than simply supplying engineering talent.