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Is AI bringing profits to the table for Indian IT enterprises?

Despite a Rs 5,400cr regulatory hit, India's Big Five IT firms show resilience in Q3 FY26. AI is shifting from pilot to profit, with TCS and HCLTech seeing ~20% AI revenue growth as the sector enters a high-value "Vanguard" phase.

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Punam Singh
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Indian IT enterprises
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The Q3 FY26 financial results for India’s top IT firms, TCS, Infosys, HCLTech, Wipro, and Tech Mahindra, reveal a sector at a dual-speed inflection point. While reported net profits were universally impacted by a collective Rs 5,400 crore one-time charge due to new Indian labor codes, the underlying "AI engine" is beginning to deliver measurable financial outcomes.

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Quarterly Results Evaluation (Q3 FY26)

The December quarter, typically soft due to seasonal furloughs, showed resilient revenue growth across the "Big Five."

Firm

Q3 Revenue (INR Cr)

YoY Growth

QoQ Growth (CC)

EBIT Margin

TCS

Rs 67,087

+4.9%

+0.8%

25.2%

Infosys

Rs 45,479

+8.9%

+0.6%

21.2%*

HCLTech

Rs 33,872

+13.3%

+4.2%

18.6%

Wipro

Rs 23,556

+5.5%

+1.4%

17.6%

Tech Mahindra

Rs 14,393

+8.3%

+1.7%

13.1%

Evaluation of AI Spending

Indian IT firms are shifting their spending from general "innovation pilots" to three distinct capital and operational expenditure categories:

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  • AI Infrastructure: Significant capital is being deployed toward "Sovereign AI" and data center stacks. A major benchmark is the TCS-TPG "HyperVault" partnership, a USD 2 billion investment aimed at building gigawatt-scale, AI-ready data centres. HCLTech is also pivoting toward managing next-generation AI data centres featuring optimized GPU stacks for global technology majors.

  • Development & Platforms: Firms are investing in proprietary platforms to industrialise AI. Notable examples include Infosys Topaz Fabric, which unifies models and agents, and Wipro Intelligence, a suite of 200+ AI agents that help the firm enter earlier in client lifecycles.

  • Project Pipeline & Talent: Workforce reskilling remains a dominant operational expense. TCS has trained over 217,000 associates in advanced AI skills, while HCLTech has shifted toward hiring "elite engineers" at significantly higher compensation levels to fuel complex AI engineering.

Is AI bringing profit to the table?

Evidence from Q3 FY26 suggests that AI is indeed becoming a profitable "core growth and execution engine," though its impact is currently felt in two specific ways:

Direct revenue contribution

AI is no longer a "side-car" to digital deals; it is a primary revenue vertical.

  • TCS reported annualised AI services revenue of USD 1.8 billion, growing at 17.3% QoQ in constant currency, far outstripping its overall growth rate.

  • HCLTech saw its "Advanced AI" revenue reach USD 146 million, marking a 19.9% QoQ surge.

  • Infosys has moved 4,600 AI projects into active delivery, working with 90% of its top 200 clients.

Operational Efficiency 

AI is also helping firms defend their margins in a high-cost labour environment. Wipro’s operating margin of 17.6%, its best in several years, was partially attributed to AI-led delivery through its WINGS and WEGA platforms, which automate complex tasks like software lifecycle analysis.

The "Profit" verdict

While the "AI Factor" is not yet enough to offset massive regulatory hits like the Rs 5,400 crore labour code impact in a single quarter, it is clearly providing downside protection. Corporate AI budgets in India are expected to rise to 1.7% of total revenue in 2026, with nearly 74% of all new contracts now having AI as a central theme. It is being believed that the sector is transitioning into a "Vanguard" phase where AI-driven productivity and value-based pricing will likely drive a sharper revenue recovery starting mid-2026.