New Delhi [India], August 31 : Indian IT services companies could see a strong growth recovery from FY27 as global technology spending shifts from building AI infrastructure to deploying artificial intelligence across enterprises, according to an Anand Rathi sector report.
The report said the AI investment cycle is moving towards implementation, integration and generating measurable returns. These areas are expected to benefit Indian IT companies, which have established capabilities in technology services.
"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.
The brokerage expects the work delayed during the past few years to start flowing to Indian IT companies from FY27 as generative AI moves from experimentation to wider enterprise adoption.
It expects this trend to strengthen further in FY28 and FY29, potentially creating a multi-year growth cycle for the IT services sector.
The report noted that the sector has 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, the report said wider AI adoption would require companies to spend more on data preparation, system integration, governance, legacy technology upgrades, cybersecurity and management of AI agents.
"AI is expanding the TAM rather than compressing it," the report said, adding that lower technology modernisation costs could revive projects that were earlier postponed.
This could create new opportunities for IT companies in areas such as AI deployment, data optimisation and AI operations, it said.
The report also pointed to growing pressure on global technology companies to justify their heavy spending on AI infrastructure.
Capital expenditure by the top five hyperscalers is expected to reach about USD 825 billion, while boards and chief financial officers are increasingly seeking clearer returns from these investments, according to Anand Rathi.
Indian IT companies have also started reporting revenues linked to AI services.
Tata Consultancy Services (TCS) has reported annualised AI revenue of USD 2.6 billion, while AI services accounted for 8.2 per cent of Infosys' revenue, the report said.
HCLTech and LTIMindtree have also reported growing revenue streams from AI services.
However, Anand Rathi cautioned that some risks remain in the near term. These include pricing pressure from AI, weak global economic conditions and the possibility that automation could affect lower-end IT services before companies can shift towards higher-value AI work.