Smaller IT firms are outpacing their larger counterparts, generating substantial revenue growth by harnessing AI, data, and process intelligence to deliver faster, outcome-focused solutions.
While these firms derive 40–50% or more of their revenue from AI and data-led services, large IT players like HCLTech report just around 3% of revenue from advanced AI, despite posting $100 million in AI-driven revenue in a single quarter.
EXL’s data and AI-led solutions are driving significant growth, accounting for 56% of the company’s total revenue. The company reported revenue of $529.6 million for Q2FY26, up 12.2% year-on-year, with data and AI-led services growing 18% compared to the same period last year.
Genpact has also seen significant contributions from AI and technology-driven services, with 48% of its total revenue coming from data-tech-AI and its advanced technology solutions business contributing 24% of revenue. Net revenues reached $1.291 billion, marking a 6.6% year-on-year increase.
Anaya Roy of Credibull Capital, a SEBI-registered investment adviser, sees a pattern in smaller companies reporting higher growth. “It has been happening for several quarters now, and it is because they are more agile, their deal durations are much shorter.”
Smaller firms have had a higher chance of renewals rather than long deals, she said, adding that the global uncertainty leads clients to defer their IT spending, but they don’t impact shorter deals.
Among other firms, Happiest Minds Technologies, Firstsource Solutions Ltd and Sonata Software also reported robust growth.
Happiest Minds Technologies reported revenue of $65.1 million for Q2 FY26, up 4.4% year-on-year, and profit after tax grew by 9.1% to ₹5,402 lakhs. The company had set up a generative AI business unit with 22 use cases and a net new sales unit to focus on AI adoption.
Firstsource Solutions Ltd reported consolidated revenue of ₹3,488 million (US$ 524 million) for Q2 FY25-26, up 20.2% year-on-year, with an operating profit margin of 26.2%. The company has been expanding through strategic acquisitions, including the UK-based customer experience outsourcing firm Ascensos, and securing deals in communications, healthcare, and lending sectors.
Sonata Software, meanwhile, reported a 13.5% jump in net profit to ₹120.9 crore, despite a drop in revenue, with AI-led orders forming about 10% of its order book. CEO Samir Dhir highlighted, “As clients accelerate AI-enabled modernisation to enhance competitiveness, we remain confident in the company’s long-term growth trajectory.”
Investors are taking note, with some small IT firms and BPM companies trading at higher P/E multiples than traditional IT companies, reflecting market recognition of the value created through AI-driven services.
The Agility Advantage of Smaller Firms
The competitive edge of smaller IT and BPM firms comes from their ability to respond to evolving client needs faster than larger counterparts, giving them an advantage in AI-led services.
Roy points out that AI has the most immediate relevance in services such as customer service and BPM process intelligence. “They (smaller IT firms) are more agile in the sense that in the current evolving AI environment, they have been able to pass on the benefits of AI productivity gains, and also they are offering better terms,” she added.
“AI has the most use in the current state in such services, like customer service, and anything else which can be replaced immediately by AI falls under what they (companies) offer.”
She said that smaller companies offer pricing terms based on outcomes rather than resources used. They have project-centred teams, rather than hierarchical organisation structures prevalent in bigger companies.
The big firms are trying to adopt the agility of the smaller players, Roy said. “TCS has already laid out plans for data centre investments over the next five to 10 years, and HCL Tech has started reporting AI revenues—it reported $100 million last quarter,” she said.
Roy said that these takeaways from mid-tier and smaller-tier companies are being adopted, but expressed doubts about the agility of the transition given the size and structures of bigger players.
Turning AI and Process Intelligence into Results
Smaller firms are embedding AI and process intelligence into operations to deliver measurable outcomes.
At Genpact, this shift is central to growth. Chief growth officer Riju Vashisht said the company is aware that if it just focuses on automating repetitive processes, it would maintain the limitations of the past, while adding the complexity of the future.
“We move forward through reinvention – and by that, I mean the reinvention of business operations, the reinvention of services and a reinvention of commercial models based on outcomes instead of FTEs.”
She added that Genpact is deliberately moving away from FTE-based models to outcome-based ones. “Already, about 70% of our advanced technology revenues come from non-FTE models, generating more than twice the revenue per headcount compared to our company average.”
Sonata Software is also leveraging AI to grow its order book. Dhir said, “The company closed a large healthcare deal, and AI-led orders formed about 10% of the order book for the quarter. As clients accelerate AI-enabled modernisation, we remain confident in the company’s long-term growth trajectory.”
With AI, data, and platform work becoming central to operations, smaller BPM firms are moving into integrated technology operations—a space traditionally dominated by IT services. The line between IT and BPM is blurring, and winners will be those that can run AI-led operations at scale.
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