India's IT sector shows signs of demand recovery as clients warm up to AI projects

FILE PHOTO: An employees walks past a signage board in the Infosys campus at the Electronics City IT district in Bangalore, February 28, 2012. REUTERS/Vivek Prakash/File Photo

BENGALURU (Reuters) -Indian IT firms Infosys, Wipro and LTIMindtree beat estimates for quarterly revenue on Thursday and pointed to improving demand in the back half of the year as clients show more willingness to fund AI projects.

Their upbeat results follow a strong showing by market leader Tata Consultancy Services last week and bode well for the $283 billion sector, which has struggled in the past few quarters as customers cut discretionary spending amid tariff-related uncertainty.

"We are benefiting from consolidation plays on automation and on using AI for efficiency. That's the big focus that we see from our clients across industries," Infosys CEO Salil Parekh said on a conference call, noting there was a "huge" opportunity in the enterprise AI space.

Buzz around artificial intelligence is prompting more companies to consider funding projects tied to the technology to improve efficiency and drive automation, potentially opening up a major revenue stream for Indian IT firms.

Infosys, which topped analyst estimates for profit and revenue in the second quarter, sees full-year revenue growth of 2-3%, compared with its prior view of 1-3%.

Jefferies analysts said the forecast was achievable due to its "strong" deal bookings.

Smaller peer Wipro, which expects its revenue to range between a 0.5% decline and a 1.5% rise for the third quarter, is also gaining from clients warming up to AI projects.

"New demand that's picking up is AI," Wipro CEO Srini Pallia said. "Clients want to move away from proof of concepts to implementing AI and agentic AI across business processes and workflows."

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Analysts viewed the quarter as a signal that the IT sector had put the worst behind it.

"The results highlight a stabilizing IT sector gradually regaining traction amid shifting client priorities toward AI and digital acceleration," StoxBox analyst Sagar Shetty said.

Anand Rathi's Sushovon Nayak confirmed that most of the IT firms, which had reported results, had shown "green shoots."

The sector has particularly gained from a recovery in spending by financial services firms.

Infosys and LTIMindtree beat second-quarter revenue estimates, driven by strength in the banking segment. ($1 = 87.8590 Indian rupees)

(Reporting by Haripriya Suresh and Sai Ishwarbharath B; Additional reporting by Kashish Tandon; Editing by Nivedita Bhattacharjee, Dhanya Skariachan and Anil D'Silva)