AI Is Eating Indian IT's Billable Hours, and the September Quarter Will Show It

India's largest IT services firms are heading into another weak quarter. Five brokerages told Reuters that results for July–September will be soft and that some companies could trim their full-year revenue guidance. Most of them point to the same cause: AI.

What the brokerages expect

• Jefferies sees the top six firms growing just 0.7% to 3.5% quarter-on-quarter, which would be the sector's weakest sequential performance in three years.
• Year-on-year, revenue is expected to rise about 10% in rupee terms, but organic growth after stripping out currency moves looks weak.
• Kotak expects Infosys to cut the top of its 1.5%–3% annual growth forecast to 2.5%. Jefferies expects a sharper cut, to 0.5%–2%.
• HCLTech and Tech Mahindra are expected to lead the large caps. Wipro is expected to lag.
• The Nifty IT index is down about 27% in 2026, against a 13.4% fall in the Nifty 50.

TCS opens the season on October 8, followed by Infosys, HCLTech and Wipro later in the month.

Why AI is the pressure point

Indian IT is a $315 billion industry that employs close to 6 million people, and most of it still bills by the hour. When AI tools make a team faster, the client wants the saving. Reuters says firms have responded by reworking business models and offering steep discounts. Jefferies called it "AI-led deflation" and said it has more legs to go, with higher oil prices and interest rates adding to the squeeze.

The first two quarters of the fiscal year are usually the strong ones, helped by more billing days and new project starts. This year the first quarter was muted, and the second is expected to be no better. Rupee depreciation may help margins a little, though hedging losses could hit profit at Tech Mahindra, Coforge and Hexaware.

My read

The sector has been putting off a business model question for a while. If AI cuts the effort on a project by a third, hourly billing hands that third straight back to the client. Firms that move to outcome-based or platform pricing keep some of the gain; those that don't end up competing on discount.

Enterprise buyers in India have leverage here. Contracts signed now should spell out who keeps the productivity gain from AI, rather than leaving it to the next renewal.

Source: Reuters — AI pressure, client caution cloud Indian IT earnings in September quarter