A FEW WEEKS AGO, at the company’s Investor AI Day 2026, Infosys chairman Nandan Nilekani shrugged off the opportunity threat posed by AI. “If anything, the opportunity is bigger than ever before. So don’t get distracted by that,” he told analysts. However, as companies chart their own paths to navigate the AI transition, Nilekani hinted at an execution risk. “I’m sure everybody won’t execute the same way. It is not an opportunity risk; it’s an execution risk.”

His view aligns with industry peers. For instance, on the sidelines of the Nasscom Technology & Leadership Forum 2026, C. Vijayakumar, CEO and MD of HCLTech, said, “Today, there is a big lag between how fast the technology is evolving and how it is getting deployed in the enterprise. I think that’s where the challenges will be. So it’s going to take time. It’s not as dramatic as what is being portrayed... But in the real world, there is so much legacy in every enterprise. I think that’s where the journey is going to be long.”

The remarks come even as Nasscom’s 2026 strategic review report projected the IT sector’s revenue to reach $315 billion in FY26, including an estimated $10-12 billion from the AI segment. Restating last year’s data on the back of expanded segment coverage, including IT services, BPM, ER&D, software products, and hardware, the overall FY26 growth is expected to be flat at 6.1%, compared to 5.8% in the previous fiscal.

While it expects export revenue to grow at 5.8% to $246.6 billion, the FY26 domestic revenue growth is pegged at 7.8% to reach $69 billion.

The estimates also show that the industry roughly added 135,000 employees in FY26, largely driven by the expansion of global capability centres and the upskilling of nearly a third of the current six million employees, including 200,000-300,000 in advanced AI skills.

But the IT bosses, even as they dismiss an existential threat to the industry, agree on an inevitable structural change. According to the Nasscom report, with accelerated adoption, AI became more of a core infrastructure in 2025.

With agentic systems moving AI from support to execution, top Indian tech firms were seen shopping for AI-native firms and developing platforms. “Fundamentally, companies have started declaring AI-related top-line growth, a small portion at this point, around 5-6%, but could go up significantly,” says Rajesh Nambiar, president, Nasscom.

This optimism is backed by Gartner, which forecasts over $2.5 trillion in AI spending in CY26,  with AI services alone touted to be more than $580 billion.

Nearly 86% of CXOs in Nasscom’s Global End User CXO Survey expect business demand to remain stable or increase in 2026. “90% of Indian enterprises are saying that they want to see RoI with AI in three years. This data point, if you compare it to countries all over the world, is at the highest,” says Sindhu Gangadharan, chairperson, Nasscom, and MD, SAP Labs India.

As AI continues to evolve, the true extent of its impact on tech companies also continues to emerge. However, in 2025, what proved more daunting was the weaponisation of tariffs and supply-chain control, Nambiar says. As they braced for new realities, companies were forced to realign delivery models.

‘A theoretical end-state’

That said, the stocks of IT services companies see heavy sell-off every time there’s an update on AI model advancements. And analysts are divergent in their views.

In a report dated February 9, Investec analysts said the recent fall in IT services and SaaS stocks appears to be driven by a narrative that marks down terminal growth rate assumptions. “In our view, the market is focussing on a theoretical end-state without assuming what it takes to get there. We argue IT services firms should benefit from legacy code modernisation, migration of legacy SaaS applications, building AI foundation layers for enterprises, and physical AI, among other opportunities,” the note said. They expect AI to drive higher business velocity over time. “The increasing hype, in our view, puts pressure on enterprises to deliver on the AI promise as fast as possible.” They also noted that deal wins for IT services vendors had meaningfully improved over the past year and revenue headwinds, led by client-specific issues, seem to have receded.

More recently, a Jefferies report echoed the idea that this may be a moment of structural change for Indian firms.

“While IT firms should remain relevant, the nature of their client engagements is likely to structurally shift towards advisory and implementation, with application-managed services (22-45% of revenues) seeing sharp revenue deflation. The extent and timing of this deflation are likely to exacerbate as AI tools become better.” The rising share of advisory and implementation engagements, Jefferies analysts observed, would not only increase the cyclicality in revenue growth but also require companies to realign their talent strategy and operating models. “Such changes in operating models are not easy to execute, and investors must factor in this risk in PE multiples,” the Jefferies note added.

With the industry growth rate for FY27 estimated to be similar to FY26 at 5-6%, Nasscom expects tech companies to consolidate strategies around core strengths, with platform-led models, services-to-solutions, outcome-based pricing, micro-vertical focus, and selective M&A becoming the differentiators. However, success in the AI era would also depend on how business models are reimagined by companies with AI-first delivery, while addressing the safety, security, and trust concerns of clients.