TCS and Infosys Report Significant Growth in AI Revenue

The launch of Anthropic's Claude Cowork earlier this year significantly changed the landscape for Indian IT companies, especially Tata Consultancy Services (TCS) and Infosys. This advanced artificial intelligence system demonstrated capabilities traditionally associated with skilled engineers, leading to substantial market shifts that affected the global IT sector. The phenomenon, termed the 'SaaSpocalypse,' resulted in dramatic declines in market valuations for many established firms within the sector.

Sridhar Vembu, founder and chief scientist of Zoho, noted the vulnerability of an industry heavily reliant on sales and marketing over engineering, tweeting, 'AI is the pin that is popping this inflated balloon.' This sentiment resonated widely as industry veterans began to question the viability of traditional IT business models.

However, eight months later, both TCS and Infosys are showcasing resilience through their financial reports. During TCS’s quarterly earnings for the second quarter of 2027, the company announced a remarkable $3.1 billion in annualised revenue from AI, reflecting over a 19 per cent increase compared to the previous quarter. This AI revenue now constitutes 10.1 per cent of TCS's total annualised earnings.

Similarly, Infosys reported a 29 per cent increase in AI revenue quarter-on-quarter, marking a significant milestone for both firms as this is the first time they have both achieved double-digit contributions from their AI operations.

In response to the challenges posed by AI, Indian IT companies are not merely resting on their laurels; they are actively pursuing innovation. TCS has established partnerships with OpenAI and Anthropic to enhance its service offerings. Infosys has also engaged in similar collaborations.

To integrate these advanced AI tools into their operations, both companies are investing in recruitment initiatives for Forward Deployed Engineers (FDEs), who are crucial in aligning customer systems with AI technology. Infosys plans to hire approximately 6,000 FDEs over the next few years, while TCS aims to bring on board about 8,900 professionals.

The results reflect shifting demand patterns, as noted by a spokesperson for TCS during an earnings call. She stated that the company is observing three distinct forms of demand: AI-native solutions with tangible business outcomes, AI transformation of existing enterprise systems, and autonomous Global Business Services (GBS).

An example mentioned included an AI-driven project that drastically reduced the lead time from 4.7 days to below one hour for a global manufacturing client. Likewise, an Infosys spokesperson spoke of modernisation projects utilising AI capabilities that signifies a fresh avenue of growth for the company.

Market analysts, like Anil Agarwal, CEO of InCruiter, observed that businesses have shifted from treating AI as a mere experimental tool to exploring its concrete benefits. Rajesh Chhabra, general manager at Acronis, remarked that companies are now integrating AI into their workflows, modernising legacy applications and leveraging data for improved performance.

TCS and Infosys benefit from their long-standing established relationships with enterprise clients. Analysts suggest that companies are inclined to maintain partnerships with existing vendors familiar with their data and compliance needs, as they seek to incorporate AI into their systems rather than adopt new partners. Infosys CEO Salil Parekh echoed this notion, emphasizing the importance of market positioning and client confidence in driving continued growth in AI revenue.

Echoing this sentiment, Tanmay Pandya, senior director at Newton School of Technology, highlighted the necessity for firms to have qualified engineers capable of both connecting AI models to existing systems and ensuring reliability, creating substantial demand for skilled talent in the Indian technology sector.

Gartner’s senior principal analyst, Biswajit Maity, argued that the prevailing narrative surrounding AI's displacement of traditional IT jobs may have overlooked the industry's adaptive capabilities. He noted a transformation in how businesses are utilising AI to enhance productivity and streamline processes, rather than substituting existing roles. 'While there were concerns that AI would threaten our people-intensive delivery models, we are observing an evolution in how these providers are engaging with AI,' he stated.

In summary, while the initial wave of AI technology posed challenges for companies like TCS and Infosys, recent reports show that they are not only weathering the storm but also finding innovative pathways to leverage AI for growth, indicating a potential resurgence in the Indian IT sector.