Executive Summary: The Great Separation

The past four quarters have marked a period of profound divergence for digital transformation in Indian IT. The IT services market in India is no longer a monolith moving in lockstep with global IT spending. It now faces a dual challenge: a cyclical, macroeconomic-driven slowdown in discretionary client spending, and, more significantly, a structural shift driven by the rapid industrialization of Generative AI (GenAI). 

This AI transformation in IT services is creating a “Great Separation” between firms. The emerging winners will be those that can successfully navigate the “AI Paradox”: simultaneously managing the inevitable revenue cannibalization of their legacy business (driven by AI-based productivity) while building new, high-value revenue streams from AI-led transformation. 

This analysis of the last four reported quarters for Tata Consultancy Services (TCS), Infosys, Wipro, HCLTech, and Cognizant reveals this divergence in sharp detail: 

• The M&A-Fueled Outperformer: Cognizant is posting aggressive, high-single-digit top-line growth. This performance, however, is significantly bolstered by a strategic M&A spree, including the acquisitions of Belcan and Thirdera, which are reshaping its vertical mix and revenue profile. 

• The Organic Outperformer: HCLTech is demonstrating resilient organic momentum. It is the only firm to publicly and consistently quantify its “Advanced AI” revenue (crossing $100 million per quarter), providing a tangible, albeit partial, answer to analyst concerns over AI-driven revenue erosion. 

• The Bastion of Profitability: TCS remains the industry’s anchor of stability. It has successfully defended its industry-leading profitability, navigating macro-uncertainty and wage hike cycles to expand margins. While its growth has been modest, its massive $39.4 billion order book for FY25 provides a significant buffer. 

• The Challenged Turnaround: Wipro is in the midst of a deep strategic transition under a new CEO. Its financials reflect this, with consistent revenue declines over the period. This turnaround is made more precarious by company-specific challenges, including a high-risk client concentration and a material provision for a customer bankruptcy in Q2 FY26.1 

• The Steady Hand: Infosys is navigating the choppy market with a focus on scaling its GenAI platform, Topaz, and securing large transformation deals.2 Its strategy appears focused on becoming a “solutions broker,” embedding AI within broader projects to manage the transition.2 

The central finding of this report is that AI is both the sector’s greatest headwind and its most significant tailwind. Analyst reports confirm that “revenue cannibalization” from AI is a “real risk” and “inevitable”.2 This analysis has found direct executive confirmation of contract renewals shrinking due to “AI-linked productivity”.3 Simultaneously, AI is the primary driver of new “mega-deals” 4 and the source of new, quantifiable revenue streams. 

The following table provides a comparative analysis of IT companies in India in the last four quarters, illustrating the widening performance gap. 

Table 1: At-a-Glance: ‘Big 5’ Performance Summary (YoY CC Revenue Growth % / Operating Margin %) 

Company	Q3 FY25 (Oct-Dec 2024)*	Q4 FY25 (Jan-Mar 2025)*	Q1 FY26 (Apr-Jun 2025)*	Q2 FY26 (Jul-Sep 2025)*
TCS	4.5% / 24.5%	2.5% / 24.2%	-3.1% / 24.5%	2.4%** / 25.2%
Infosys	6.1% / 21.3%	4.8% / 21.0%	N/A	N/A
Wipro (IT Svcs)	-0.7% / 17.5%	-1.2% / 17.5%	-2.3% / 17.3%	-2.6% / 16.7%***
HCLTech (EBIT)	4.1% / 19.5%	2.9% / 18.0%	3.7% / 16.3%	4.6% / 17.4%****
Cognizant (Adj.)	6.7% / 15.7%	8.2% / 15.5%	7.2% / 15.6%	6.5% / 16.0%

*Cognizant quarters are for its fiscal year (CY 2024/2025). N/A indicates data was not available in the provided materials. 

**TCS Q2 FY26 growth is YoY reported, not CC. 

***Wipro’s Q2 FY26 adjusted margin, excluding a $13.1M customer bankruptcy provision, was 17.2%.1 

****HCLTech’s Q2 FY26 EBIT margin includes a 55 bps impact from restructuring costs.3 

Sources: S11, S13, S17, S53, S75, S85, S87, S92, S97, S103, S126, S130, S149, S154, S160, S166, S178, S180,.1 

Comparative Financial Analysis: A Widening Gap in Growth and Profitability

Headline Revenue Growth Analysis 

The divergence in revenue performance is the most telling trend of the past year. While HCLTech has delivered steady, resilient mid-single-digit growth, and Cognizant has posted high-single-digit growth, TCS and Wipro have lagged significantly. 

Cognizant’s performance has been a standout, with constant currency (CC) growth ranging from 6.5% to 8.2%. However, this growth must be contextualized. The company’s new leadership has aggressively pursued an inorganic strategy, and its acquisitions of Belcan and Thirdera provided a 400 basis point (4.0%) tailwind to its YoY growth in Q1 2025 alone. 

In stark contrast, Wipro has been in a persistent revenue trough, reporting four consecutive quarters of negative YoY CC growth. This decline has been consistent, with Q3 FY25 at -0.7%, Q4 FY25 at -1.2%, Q1 FY26 at -2.3%, and Q2 FY26 at -2.6%. This trend underscores the deep challenges the new revenue growth management team faces in a difficult macro environment. 

TCS and HCLTech represent the traditional, organic-led models. HCLTech has proven more resilient, with CC growth accelerating from 2.9% in Q4 FY25 to 4.6% in Q2 FY26.5 TCS, conversely, has shown more volatility, with growth ranging from 4.5% in Q3 FY25 to a surprising negative 3.1% in Q1 FY26, before recovering to 2.4% YoY (reported) growth in Q2 FY26.6 Infosys’s available data for Q3 and Q4 of FY25 showed solid growth at 6.1% and 4.8% respectively, but more recent data for FY26 was not available in the provided materials.7 

Table 2: Quarterly Revenue Growth (Year-over-Year, Constant Currency %) 

Company	Q3 FY25 (Oct-Dec 2024)	Q4 FY25 (Jan-Mar 2025)	Q1 FY26 (Apr-Jun 2025)	Q2 FY26 (Jul-Sep 2025)
TCS	4.5%	2.5%	-3.1%	2.4% (Reported)
Infosys	6.1%	4.8%	N/A	N/A
Wipro (IT Svcs)	-0.7%	-1.2%	-2.3%	-2.6%
HCLTech	4.1%	2.9%	3.7%	4.6%
Cognizant	6.7%	8.2%	7.2%	6.5%

N/A indicates data was not available in the provided materials. 

Profitability and Margin Trend Analysis 

On profitability, TCS has reaffirmed its “fortress” status. The company has maintained its operating margin in a remarkably stable and industry-leading range of 24.2% to 25.2% over the four quarters.6 This was culminating in an expansion to 25.2% in Q2 FY26, a 70 basis point QoQ improvement, demonstrating rigorous operational control even while absorbing wage hikes. 

Wipro’s margin story is one of acute pressure. In Q2 FY26, the company reported an IT services operating margin of 16.7%.1 Critically, this figure was impacted by a provision of $13.1 million (₹1,165 million) related to the bankruptcy of a single customer.1 When adjusted for this one-time event, the margin was 17.2%, representing a 0.4% YoY expansion but a 0.1% QoQ contraction. This highlights both the underlying margin pressure and the high-impact risk in its client portfolio.  

HCLTech and Cognizant are balancing investment and margins. HCL’s EBIT margin has fluctuated, from a strong 19.5% in Q3 FY25 to a seasonally soft 16.3% in Q1 FY26, before recovering to 17.4% in Q2 FY26.5 This Q2 margin included a 55 basis point impact from restructuring costs, indicating an underlying margin closer to 18.0%. Cognizant has executed a disciplined expansion of its adjusted operating margin, which grew 70 basis points YoY to 16.0% in its most recent quarter (Q3 2025). 

Table 3: Quarterly Operating Margin (%) Trend 

Company	Q3 FY25 (Oct-Dec 2024)*	Q4 FY25 (Jan-Mar 2025)*	Q1 FY26 (Apr-Jun 2025)*	Q2 FY26 (Jul-Sep 2025)*
TCS	24.5%	24.2%	24.5%	25.2%
Infosys	21.3%	21.0%	N/A	N/A
Wipro (IT Svcs)	17.5%	17.5%	17.3%	16.7%
HCLTech (EBIT)	19.5%	18.0%	16.3%	17.4%
Cognizant (Adj.)	15.7%	15.5%	15.6%	16.0%

Cognizant quarters are for its fiscal year (CY 2024/2025). N/A indicates data was not available in the provided materials. 

Sources: S11, S13, S17, S53, S85, S87, S92, S97, S103, S126, S149, S154, S166, S178, S180,.1 

 Performance by Vertical: Pockets of Decay and Engines of Growth

A vertical-level analysis reveals the precise fault lines of the current market. The industry’s traditional “bread and butter” verticals—Banking, Financial Services, and Insurance (BFSI) and Communications & Media—are facing deep, persistent weakness. This softness is a clear indicator of both macroeconomic caution and the first wave of AI-driven productivity, which disproportionately impacts these mature, large-scale verticals. 

For industry leader TCS, the pain in these sectors is stark. In Q1 FY26, its BFSI vertical grew at an anemic 1.0% YoY CC, while its Communication & Media vertical was in a freefall, declining by 9.6% YoY CC. Life Sciences & Healthcare also saw a significant -9.6% decline. HCLTech’s performance in Q3 FY25 (Oct-Dec 2024) similarly showed a 1.4% CC decline in Financial Services.9 

However, this weakness is not universal. The data reveals two glaring outliers that highlight the “Great Separation” in strategic execution: 

1. HCL’s Mega-Deal Momentum: While TCS’s Comms vertical was declining, HCL’s “Telecommunications, Media, Publishing & Entertainment” vertical posted a staggering 33.1% YoY CC growth in Q3 FY25.9 This was followed by 13.0% growth in Q1 FY26.5 This is not an industry trend; it is the clear impact of a single, massive-scale deal (widely known to be its Verizon engagement) ramping up. This highlights HCL’s success in booking large deals but also introduces a significant risk of “lumpiness” and a future growth cliff when the deal plateaus. 
2. Cognizant’s Market Share Gains: Cognizant has successfully bucked the negative BFSI trend. Its Financial Services vertical grew 6.0% in CC in Q2 2025 (Apr-Jun 2025) 10, an acceleration from Q4 2024’s 2.8%. Its Health Sciences vertical has been a consistent powerhouse, growing 14.3% in Q1 2025. This suggests Cognizant’s new leadership is using an aggressive, AI-led strategy to win market share from peers in their most vulnerable verticals. 

Beyond these outliers, growth pockets exist in Manufacturing and Energy, Resources & Utilities (ERU), which have been strong performers for TCS and Infosys.8 

Table 4: Revenue Growth by Vertical (YoY CC %) – Most Recent Available Quarter 

Vertical	TCS (Q1 FY26)	Infosys (Q4 FY25)	HCLTech (Q1 FY26)	Cognizant (Q2 2025)	Wipro
BFSI / Fin. Svcs	1.0%	4.8%	6.8%	6.0%	N/A
Health / Life Sciences	-9.6%	-3.4%	-4.0%	5.3%	N/A
Manufacturing	-4.0%	14.0%	-1.0%	14.7% (P&R*)	N/A
Retail / Consumer	-3.1%	-2.6%	8.2%	14.7% (P&R*)	N/A
Comm. & Media / Tech	-9.6% (Comm)	0.0% (Comm)	13.0% (Telecom)	2.2% (CMT)	N/A
Tech & Services	1.8%	-1.1% (Hi-Tech)	13.7%	2.2% (CMT)	N/A
Energy, Resources & Utilities	2.8%	1.5%	-2.4% (Public**)	14.7% (P&R*)	N/A

*Cognizant combines Manufacturing, Retail, and ERU into “Products & Resources” (P&R). This vertical’s 14.7% growth was heavily impacted by the Belcan acquisition, which added ~16 percentage points. 

**HCL combines ERU into “Public Services.” 

Wipro’s vertical-level growth data was not available in the provided materials, which only listed the vertical revenue mix.1 

C-Level Commentary: The Battle of Narratives

The “why” behind these divergent numbers is best explained by the C-level executives themselves. Each CEO is crafting a distinct narrative to manage market expectations and articulate their strategy for navigating the AI inflection point.  

TCS (K. Krithivasan, CEO): The “Stability and Scale” Narrative  

TCS’s commentary is one of ultimate stability and reliability. The focus is on its scale, its massive order book, and its role as a long-term, non-disruptive partner for clients navigating uncertainty. 

• On Performance: “We are pleased to cross the $30 Billion in annual revenues and achieve a strong order book for the second consecutive quarter”. 

• On Strategy: “Our expertise in AI and Digital Innovation, coupled with the unmatched knowledge of customer context and global scale makes us the pillar of support for our customers in this environment of macroeconomic uncertainty”. 

The TCS narrative is not about being the first-mover in AI. It is about being the one to industrialize it at scale. By highlighting its $1.5 billion AI pipeline and “strong and increasing traction in AI-adoption”, TCS signals to the market that it will be a “fast follower” that captures the largest, most complex AI transformation deals over the long term, positioning itself as the safe harbor.  

HCLTech (C. Vijayakumar, CEO): The “Quantified AI” Narrative  

HCLTech’s narrative is arguably the most sophisticated in its transparency. Management is directly confronting analyst fears of AI-driven cannibalization by quantifying the “creation” side of the AI equation. 

• On Performance: “A standout quarter on every front — marked by strong execution, growing demand for our AI-powered solutions and Advanced AI revenue exceeding $100 million this quarter”. 

• On Bookings: “For the first time, our new bookings surpassed $2.5 billion, without reliance on any mega deal”. 

Vijayakumar is the only CEO putting a hard dollar figure on AI-specific revenue. This is a deliberate strategic move. Analyst reports have explicitly named “revenue cannibalization in legacy service lines” as a “real risk” for HCL. Furthermore, HCL management has acknowledged that some of its top 10 contract renewals have seen the Statement of Work (SOW) decline due to “AI-linked productivity”.3 By proactively publicizing the $100 million+ in “Advanced AI” creation, HCL provides a tangible counter-narrative, suggesting it can manage this transition profitably. The comment on bookings “without reliance on any mega deal” is also a direct attempt to calm investor fears about the lumpiness seen in its Comms vertical.9  

Wipro (Srini Pallia, CEO): The “Turnaround and Rebuilding” Narrative 

As the new CEO, Srini Pallia’s narrative is one of realism and focused execution. His primary task is to set expectations for a turnaround, stabilize the business, and rebuild the order book. 

• On the Environment: “In a quarter shaped by macroeconomic uncertainty, clients prioritised efficiency and cost optimization”. 

• On Strategy: “We partnered closely with them to address these needs, resulting in 16 large deals, including two mega deals”. 

This commentary, from his first quarterly call, frames Wipro as a partner for “cost optimization”—the very “Vector 1” efficiency play that AI enables. By highlighting “mega deals,” Pallia is signaling to the market that Wipro can still win large, foundational contracts, which are essential to reversing its revenue decline. His narrative is about stabilizing the foundation before pursuing more aggressive AI-led strategies.  

Cognizant (Ravi Kumar S, CEO): The “Aggressive AI-Builder” Narrative  

Cognizant’s commentary is the most bullish and strategically aggressive of the group. CEO Ravi Kumar, who joined from Infosys, is not just participating in the AI trend; he is leading with it, framing it as the central pillar of Cognizant’s growth story. 

• On Performance: “Third quarter revenue grew 6.5% year-over-year… representing our fifth consecutive quarter of year-over-year organic revenue growth”. 

• On AI Strategy: “We believe our three vector AI builder strategy is gaining traction”. 

A deeper look into the earnings call transcripts 4 reveals the sophistication of this “3-vector” narrative. Kumar frames AI as a “double engine transformation”: 

• Vector 1: “AI efficiency-led large deals.” This is the “cannibalization” piece. Kumar’s narrative smartly frames this as a feature, not a bug—it is the funding mechanism for clients to underwrite their innovation. 

• Vector 2 & 3: “Industrializing AI” and “agentifying the enterprise.” This is the “creation” piece. He explicitly states that “agentic AI [is] unlocking new revenue pools and spend cycles“.4 

This is a powerful narrative. Cognizant is actively pushing new terminology (“agentic AI,” “agentifying”) that is now entering the market lexicon. The strategy is to use AI efficiency (Vector 1) to get a foot in the door, and then use those savings to fund new, high-value transformation projects (Vectors 2 & 3), driving the “mega deal wins”.4  

Infosys (Management): The “Platform and Efficiency” Narrative  

While direct CEO commentary was less prominent in the provided materials, analyst reports on Infosys detail a clear “platform-led” strategy. The company is positioning its GenAI platform, Topaz, and its AI-enabled Finacle platform to manage the AI transition. 

The strategy, as analyzed by TBR 2, is to manage the “inevitable” cannibalization by “folding these offerings under broader transformation projects” and becoming a “solutions broker.” By focusing on “AI- and automation-enabled service delivery,” Infosys aims to protect its operating margins even as legacy work volumes are pressured.2 

Client Metrics: The “Shrinkage” in Plain Sight

The hypothesis that top-client revenues are shrinking is not just a theory; it is now visibly manifesting in the client metrics of the industry’s largest players. 

 TCS: Contraction in High-Value Client Buckets  

The most compelling evidence comes from TCS. While the company’s order book remains massive ($39.4 billion for FY25), its client-bucket metrics show signs of erosion at the top. 

In its Q1 FY26 results (quarter ended June 30, 2025), TCS reported a year-over-year decrease in its most valuable client cohorts. The number of $100M+ clients declined by 1 (from 63 to 62), and the number of $50M+ clients declined by 9 (from 140 to 131). 

Given TCS’s high-quality client base and strong TCV, it is highly improbable that these clients are “leaving” the firm. The logical and more profound conclusion is that their annual revenue contribution is shrinking. A $100 million-per-year account, upon renewal, is implementing new AI-driven efficiencies and productivity measures, transforming it into an $85 million or $90 million account. This “shrinkage” is just enough to push it from the $100M+ bucket into the $50M+ bucket, creating the net-negative count. This is a clear, data-driven example of AI-led revenue cannibalization.  

Wipro: The High-Risk Concentration 

 Wipro’s client metrics reveal a different vulnerability: high-risk concentration. As of Q2 FY26, Wipro’s top 5 clients accounted for 14.4% of its revenue, and its top 10 clients accounted for 24.0%.1 

This concentration is notably higher than its peers. For comparison, HCLTech’s top 10 clients account for 20.2% of its revenue 5, and Infosys’s top 10 account for 20.7%.8 This heavy reliance on a small number of large clients creates a high-risk, high-reward portfolio. 

This risk was starkly realized in Q2 FY26 (Jul-Sep 2025). Wipro’s IT Services Operating Margin was directly impacted by a ₹1,165 million ($13.1 million) provision “made with respect to bankruptcy of a customer”.1 For a single client event to materially impact the entire company’s operating margin demonstrates the significant vulnerability Wipro faces. Executing a corporate turnaround is difficult; doing so with a client portfolio that carries this level of concentration risk is exceptionally challenging. 

Special Analysis: The Generative AI Impact – Cannibalization vs. Creation

The core strategic question for the entire industry is whether AI is a net-positive or net-negative force on revenue. The data from the last four quarters shows it is unequivocally both. The battle is to ensure “creation” outpaces “cannibalization.” 

 6.1 The Cannibalization Threat: AI as a Headwind  

AI-driven productivity is leading to scope reduction, pricing pressure, and revenue erosion in legacy contracts, particularly in Application Maintenance, BPO, and Quality Engineering. 

• Analyst Confirmation: Industry reports are explicit on this front. An analysis of HCLTech states that “revenue cannibalization in legacy service lines remains a real risk if offsetting new-gen demand does not scale as fast”. Similarly, a TBR report on Infosys notes that “a degree of revenue cannibalization is inevitable in the long run” due to automation and AI.2 

• Executive Confirmation: The most direct evidence comes from HCLTech’s management commentary. In an earnings call, executives confirmed that in five of their top 10 contract renewals, the SOWs declined due to the impact of “AI-linked productivity”.3 

This is the root cause of the weakness in mature verticals like BFSI and Communications. It is also the most likely driver behind the shrinkage in TCS’s high-value client buckets. The “productivity pass-through,” where vendors must share AI-driven efficiency gains with clients in the form of lower prices, is no longer a future threat; it is a present reality.  

6.2 The Creation Engine: AI as a Tailwind  

Simultaneously, AI is creating entirely new, high-value demand for complex transformation projects, and the scale of this new market is massive. 

• Quantified Revenue: HCLTech is already booking over “$100M” in quarterly revenue from what it terms “Advanced AI”. This is tangible, “created” revenue that did not exist before. 

• Pipeline & Deal Wins: TCS has built a $1.5 billion AI pipeline, signaling the scale of future opportunities. Cognizant’s CEO has been explicit that “AI-driven technology deployments” are the engine behind their “mega deal wins” and that “agentic AI” is “unlocking new revenue pools”.4 

• Market Scale: As a market parallel, competitor Accenture reported booking $1.5 billion in GenAI-specific deals in a single quarter (Q3 2025), contributing to $4.1 billion in GenAI bookings year-to-date in FY25. This proves that the “creation” side of the market is a multi-billion dollar opportunity. 

 6.3 Synthesis: The AI Transition  

The “Big 5” are in a forced transition. The Indian IT giants must revise their AI strategy to make their own service delivery hyper-efficient. They are then forced to “pass through” a portion of these savings to clients to defend their legacy contracts, resulting in the “cannibalization” observed. 

The winning strategy, best articulated by Cognizant’s CEO 4, is to link these two forces. It involves convincing the client to reinvest the savings from AI-driven efficiency (Vector 1) directly into new, transformative AI projects (Vectors 2 & 3), such as process “agentification” and building new AI-native business platforms. 

The primary risk for the industry is a time lag. If the “cannibalization” of legacy revenue scales faster than the “creation” of new AI-led revenue, these firms will face a significant “revenue valley” in the coming years. 

Concluding Outlook: The New Battleground

The past four quarters have confirmed the end of the “one-size-fits-all” Indian IT services story. The macroeconomic slowdown is a temporary headwind, but the structural disruption from AI is permanent. This has created a new battleground where each of the “Big 5” is positioned differently. 

• TCS and Infosys: These two giants are positioned as the large, stable “solutions brokers”.2 They will manage the AI transition at industrial scale, prioritizing margin stability and using their powerful platform plays (TCS BaNCS, Infosys Topaz) to embed AI into the core of their clients’ enterprises. Their narrative is one of reliability and long-term partnership. 

• Cognizant: This is the “aggressive challenger.” Under new leadership, it is successfully using a combination of M&A and a powerful, forward-leaning “Agentic AI” narrative 4 to seize market share. Its high-growth numbers prove the strategy is gaining traction, but its long-term success will depend on its ability to successfully integrate its many acquisitions and maintain profitability. 

• HCLTech: This is the “transparent incumbent.” It is uniquely managing the AI transition by publicly acknowledging its risks (SOW shrinks) 3 while simultaneously quantifying its successes (the $100M+ in quarterly AI revenue). Its “mega-deal” strategy in verticals like Telecoms provides strong top-line cover for this transition.9 

• Wipro: This firm faces the most arduous path. It must execute a full-scale corporate turnaround under a new CEO during this massive structural market shift. This internal challenge is amplified by a high-risk, high-concentration client portfolio that has already demonstrated its vulnerability.1 

Ultimately, the hypothesis that AI-driven shrinkage is occurring is correct. It is visible in the vertical-level revenue declines and the contraction of top-client revenue buckets. 

Success over the next three years will not be measured by the traditional metrics of headcount growth or labor arbitrage. It will be defined by a firm’s ability to manage the “inevitable cannibalization” of its past while aggressively building and scaling the “agentic” 4 and AI-driven future. The race is on to ensure the creation engine roars to life before the cannibalization engine fully takes hold.