AI Disrupts Indian IT Services While Driving Cloud Growth

Indian technology services are experiencing a divergence between traditional revenue stability and rapid AI-driven infrastructure growth. Crisil Ratings projects muted revenue growth of 1-3% this fiscal and 2-4% in the following fiscal year, citing artificial intelligence disruptions, weak discretionary spending, and geopolitical uncertainties. The agency notes that AI is challenging traditional revenue models by intensifying pricing pressure and forcing deal renegotiations as clients reassess technology spending.

Despite these headwinds, operating margins are expected to remain between 22-23% this fiscal, supported by prudent resource management and a 5-7% depreciation of the rupee. However, this cushion may narrow in the next fiscal year as talent costs and AI investments increase. The labor market remains muted as companies prioritize automation and selective hiring for AI skills.

Conversely, Equirus Securities reports strong growth in the cloud and infrastructure segments. End-user spending on public cloud services in India is projected to grow 28.1% year-on-year to 17.5 billion USD by 2026. The AI services market is already generating an estimated 10-12 billion USD in revenue, with 25% of enterprises moving AI projects from pilot to production. Globally, colocation data center demand is expected to nearly triple to 220 GW by 2030, with AI workloads accounting for 70% of that demand.