India’s top IT services firms entered the December quarter carrying the promise that AI would lift growth, protect margins, and pump momentum into a sector that had been slowing for the past two years. That promise was delivered.
Revenues rose across the board, even as profits fractured and headcount strategies split.
TCS led by a wide margin, reporting ₹67,087 crore turnover in Q3 FY26 with sequential growth of 2%. Infosys followed with ₹45,479 crore, up 8.9% year-on-year. HCLTech posted ₹33,872 crore, growing 13.3% YoY. Wipro reported ₹23,555 crore, up 5.5% YoY.
Meanwhile, Tech Mahindra posted its strongest momentum in years, delivering ₹14,393 crore revenue at 8.3% YoY growth. Its net profit also rose 14.1% to ₹1,122 crore, even as others took a hit due to new labour codes implementation, restructuring costs, and one-time charges that cut into their margins.
But the big takeaway was AI, which is now Indian IT’s operating logic in how work is sold, delivered, priced, and staffed. The quarter made one thing unmistakable: AI is no longer just a project; it’s Indian IT’s saving grace.
Everything AI
AI was part of nearly every deal win in the quarter.
Infosys closed $4.8 billion in large deals, sharply up from $3.1 billion in Q2. TCS reported a total contract value of $9.3 billion, one of its strongest quarters in recent memory. HCLTech saw new deal wins rise 43.5%YoY to $3 billion. Wipro booked $3.3 billion, with large deals at $891 million.
Tech Mahindra’s $1.1 billion in new deals looked modest, yet it grew 47% YoY and carried a visible margin impact. chief executive and managing director Mohit Joshi said almost all large deals are now AI-infused.
While Tech Mahindra didn’t reveal headline revenue, TCS chose to flaunt it. It reported $1.8 billion in annualised AI revenue, up from $1.5 billion in the previous quarter. The number includes AI embedded inside cloud, data, applications, and industry projects, along with AI-focused data centres.
Notably, AI is still a very small percentage of the total revenue for the firm, showing that it is still too early to report separate AI revenue.
As UnearthInsight’s Gaurav Vasu earlier told AIM, “Most of these revenues are part of existing deals. None of the Indian pure plays has a separate AI business vertical. Even if you count it, it is embedded in engineering, application development or infrastructure. Counting it separately doesn’t make sense.”
HCLTech chose precision. It reported $146 million in what it calls advanced AI revenue, growing nearly 20% sequentially. This excludes AI embedded inside traditional services and only counts agentic AI, robotics, physical AI, AI factories, data centre services, and product-led work.
Meanwhile, Infosys chose a third path. It refused to publish an AI revenue and instead focused on its impact. The company reported 4,600 active AI projects, more than 500 AI agents in production, and nearly 28 million lines of code generated using AI tools. Around 90% of its top 200 clients are now running AI programmes.
Vasu now says that this approach reflects where the market is headed. As AI matures, it is being embedded across transformation programmes, application modernisation, ER&D work, and managed services.
Vasu argues that much of what the industry is calling “AI revenue” is already buried in existing contracts. “AI components are bundled within broader transformation or run engagements, and pricing reflects outcome improvement rather than tool usage,” he says. In many deals, AI is assumed as a default capability rather than a premium add-on.
The Guidance Story
Guidance and outlook became the quiet story of the quarter.
Infosys raised its full-year revenue guidance to 3–3.5%, its second upward revision in two quarters, citing improved market visibility and robust large deal wins. HCLTech upgraded its services revenue guidance to 4.75–5.25% after reporting $3 billion in bookings.
Wipro’s guidance of 0-2% growth in the fourth quarter shocked the industry, with the company’s shares falling over 8% on Monday. TCS and Tech Mahindra do not provide formal guidance, but both signalled improving pipelines driven by AI-led demand.
Namratha Dharshan, chief business leader at ISG India Research, tells AIM that the market is stabilising after two volatile years. Providers are seeing a slight uptick from last year with healthy pipelines and faster AI-led demand than what managed services can currently absorb.
AI is accelerating growth in cloud, infrastructure, and platforms while putting pressure on traditional labour-based pricing and margins. The sector is not out of the woods as the guidance is below 5%. Yet without AI, the quarter would have looked far weaker.
“AI has certainly positively impacted the ‘As a Service’ market. AI is now a demand driver, not a future theme,” Dharshan notes. “Hyperscaler growth accelerated sharply, IaaS delivered another record year, and SaaS demand held up well in platforms tied to infrastructure, analytics, IT service management, and collaboration.”
She adds that AI continues to be a demand driver for managed services, but there is increased pressure on providers to deliver outcomes beyond efficiency and productivity. “Pricing on AI is still something that the industry is figuring out. But it seems like an optimistic driver for most of the service providers in the deal pipeline.”
What About Talent?
IT companies during the earnings calls made the case that AI is being used to raise throughput and compress timelines rather than replace talent. At the same time, according to an analysis by TOI, India’s top five IT services firms added just 17 net employees in the first nine months of FY26. The figure is a steep fall from the 17,764 net hires recorded in the same period last year.
Though the companies didn’t link it to AI, headcount numbers across the sector hinted at a possible AI impact.
TCS cut over 11,000 employees in the quarter, ending with 5,82,163 people, and said reductions would continue. Infosys added 5,043. HCLTech trimmed selectively. Wipro added 6,529, taking total headcount to 2,42,021, driven largely by fresher onboarding. Tech Mahindra reduced headcount by 872 year-on-year to 1,49,616, while still growing revenue per employee.
Freshers are no longer being trained to write boilerplate code. They are expected to manage AI-assisted systems, test outputs, ensure compliance, and oversee workflows. That shift explains why Infosys and HCLTech have announced sharply higher salaries for a narrow slice of AI-ready freshers, even as mass hiring remains cautious.
Pricing is the next fault line.
Today, AI-driven productivity gains largely show up as cost savings passed back to clients. Tech Mahindra wants to change that. Joshi spoke openly about separating human labour from digital labour in pricing models, potentially linking digital labour pricing to token consumption.
It signals a future where AI is monetised as capacity rather than effort.
The post AI Was Indian IT’s Saving Grace in Q3, And Hints at What’s to Come appeared first on Analytics India Magazine.
