Blame it on AI: Revenue, hirings diverge at top IT services companies
The largest Indian IT services companies are signalling a fundamental shift in their business model. The change has significant implications for India's 1.5 million engineering graduates.
The country’s 1.5 million engineering graduates might find it tougher to land a job at the largest IT services companies, as employee additions might not be in proportion with revenue growth due to the rise in automation tools.
Simply put, if an IT services company added 30 employees for every $100, about ₹9,000, in new business every year, it might add fewer employees for the same amount of incremental revenue going ahead because of AI-led productivity.
Artificial intelligence (AI) is primarily eating into coding, customer support, and application maintenance roles.
Tata Consultancy Services (TCS) Ltd, Cognizant Technology Solutions Corp., and HCL Technologies Ltd have highlighted the non-linearity of revenue and headcount growth due to AI, noting that project delivery models are evolving.
This is a first for the industry, which has looked at increasing headcount as a barometer for revenue growth. Traditionally, a higher headcount has been associated with increased demand for IT services, and vice versa. The change in stance for the country’s largest IT services companies comes at a time when AI is reshaping the sector and prompting companies to reassess their project delivery to clients.
HCLTech, India’s third-largest IT services firm, was the first of the big five to highlight the disconnect between revenue growth and headcount.
Ending old ways
“If you see our revenue in the last couple of years, we have grown 4-5% and our headcount has not grown. So, that gives you a sense that there is some non-linearity playing out. Even this quarter, in revenue growth and headcount, there is at least a 1.5% or 1% difference. And when you take a year-on-year, there is a 1.8% increase in revenue per employee. So, that is the kind of uptick that we expect to see," said C. Vijayakumar, chief executive officer (CEO) of HCLTech, during the company’s post-earnings call with analysts on 13 October.
HCLTech ended last quarter with $3.64 billion in revenue, up 2.8% sequentially.
At least one brokerage attributed this trend to the use of AI.
“Non-linearity (in revenue and headcount growth) is evident as revenue grew faster than headcount (2.4% vs. 1.6%), reflecting productivity gains driven by AI," said Motilal Oswal Financial Services analysts Abhishek Pathak, Keval Bhagat, and Tushar Dhonde, in a note on 13 October.
While HCLTech highlighted the growing divergence, Indian heritage company Cognizant voiced a similar opinion.
"For much of the last 30 years, IT services grew through a linear model. More people and more projects drove incremental growth. AI is reshaping that equation by compressing time, cost, and complexity, and redefining how value is created," said S. Ravi Kumar, CEO of Cognizant, during the company’s post-earnings call on 29 October.
According to Phil Fersht, CEO of HFS Research, “The era of one-to-one growth between people and revenue is over. AI and automation are breaking that link by embedding productivity and repeatability into the delivery model. The new game is about turning services into software and driving more value from the same workforce."
Gaining productivity
Cognizant is an Indian heritage IT firm, as almost three-fourths of its workforce is based in the country. It ended the last quarter with $5.42 billion in revenue, a 3.2% sequential increase.
A third company’s management said this trend is causing a shift in the IT services model when asked about the interplay between humans and AI.
“I think that is the direction in which the model is going to evolve. These are initial days, but we are starting to make commitments on outcome-based projects with select customers. And there are learnings, and this is a model that we see increasingly evolving and becoming more mainstream with customers," said Aarthi Subramanian, chief operating officer of TCS, during the company’s post-earnings analyst call on 9 October.
TCS ended last quarter with $7.47 billion in revenue, up 0.6% sequentially.
Mint had reported on 26 March that the country’s $283 billion IT industry is considering a change in its delivery model. Traditionally, companies are billed by IT service providers on the headcount deployed in a project. Increasingly, companies are now being billed according to the business outcomes that IT outsourcers deliver.
Increasing divergence between revenue growth and headcount may not bode well for the country’s 1.5 million engineering graduates, many of whom seek jobs in the country’s largest IT services firms. The rise of automation tools has the potential to make several human-led tasks redundant, and colleges are now looking to equip their students with AI certifications to keep them market-ready.
AI is primarily eating into coding, customer support, and application maintenance roles.
Employee value
TCS, Cognizant, and HCLTech ended the July-September 2025 period with 593,314 employees, 349,800 employees, and 226,640 employees. While TCS cut headcount by 19,755 last quarter due to its largest layoff drive announced earlier, Cognizant and HCLTech added headcount by 6,000 and 3,489 employees, respectively.
A key determinant of this trend is the revenue each employee fetches for their company.
HCLTech gets the highest revenue per employee of the country’s six largest IT services companies. HCLTech and TCS received $61,388 and $49,902 per employee, respectively. On the other hand, Cognizant, which follows a January-December financial calendar as opposed to the Indian IT industry’s April-March calendar, reported $57,665 per employee at the end of 2024.
To be sure, HCLTech gets almost a tenth of its business from selling software products, which uses fewer people.
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