Artificial intelligence is reshaping India’s IT industry, bringing both short‑term challenges and long‑term opportunities that position the sector for robust growth. With global AI spending projected to surge 44% in 2026, Indian IT firms are at the forefront, leveraging their talent and scale to drive AI adoption while evolving beyond traditional outsourcing.
Short-Term Gains Amid Adjustment
In the near term, AI is sparking a demand revival after years of sluggish growth. Q3 FY26 results from top firms like TCS and HCL show AI‑led deals fuelling revenue upticks, with TCS alone reporting $1.8 billion in annualised AI revenue, up 17.3% sequentially. Indian IT giants now project nearly $2 billion in combined annual recurring revenue from advanced AI services, as clients in BFSI, retail, healthcare, and manufacturing seek domain‑specific automation and copilots.
While some automation may displace routine coding jobs, the overall effect is positive: AI boosts productivity by 25–35% in key metrics, enabling faster project delivery and higher margins. Deal structures are shifting to longer tenures and higher values, with single‑quarter signings hitting $3–9 billion, much of it net‑new AI work. This resurgence shakes off the post‑pandemic slump, with AI expenditures driving much of the sector’s renewed confidence.
Long-Term Transformation and Leadership
Looking ahead, AI will fundamentally upgrade India’s IT ecosystem by 2027, where most work will involve human‑AI teams, with AI taking the lead in routine tasks while humans focus on judgment, creativity, and strategy. Firms like EPAM predict 2026 as India’s “AI year,” with investments in AI‑native engineering, agentic workflows, and enterprise copilots becoming core capabilities, akin to cloud or cybersecurity today.
This evolution mitigates risks—analysts estimate 9–12% of revenues could shift due to tech changes, but resilient players will thrive by delivering measurable outcomes. India’s 1.5 million IT professionals are reskilling rapidly, supported by initiatives like the IndiaAI Mission and upcoming AI Impact Summit in February 2026, ensuring the workforce pivots to high‑value roles. The result? A more competitive sector contributing to India’s goal of becoming a global AI hub.
Overall, AI isn’t a threat—it’s an accelerator, turning India’s IT prowess into a trillion‑dollar engine for innovation and exports.
