India’s top offshoring firms just reported a prolific quarter of billion-dollar contracts, but that also signalled a stark new reality for the $283-billion sector: an intensifying race among the country's largest software services providers to grab each other's share.
In October-December, Cognizant Technology Solutions Corp, Tata Consultancy Services Ltd and Infosys reported three mega deals combined, the most in nine quarters, according to their earnings filings. These involve deploying artificial intelligence (AI) tools to transform clients’ legacy information technology (IT) infrastructure.
Yet, Fortune companies are reducing the number of IT vendors they work with to reduce their long-term software services costs, analysts say.
“It signals a clear shift back toward platform scale transformation deals, not a return to labour-heavy outsourcing,” said Phil Fersht, chief executive of HFS Research. “Large enterprises are consolidating vendors and committing to multi-year programs that combine technology modernization, AI enablement, and operating model change.”
The spike in large contracts points to how AI is reshaping the software services sector even as homegrown offshorers grapple with low demand amid global trade uncertainty and stricter visa scrutiny in the US, their largest market.
Return of mega deals
Tata Consultancy Services (TCS) secured a mega deal from a North American financial institution in the December quarter, the company said during its post-earnings analyst call. The company didn’t disclose the client’s name.
Nasdaq-listed Cognizant reportedly clinched a $1-billion contract from Switzerland-based Novartis during the quarter. The New Jersey-based IT outsourcer, primarily staffed in India, will manage the pharma giant’s AI-led services, data and application management.
In October, India’s second-largest IT firm Infosys Ltd won a 15-year IT modernization contract worth $1.6 billion with the NHS, the UK’s national healthcare provider.
Earlier, Cognizant bagged two mega deals in the April-June 2025 period: one IT infrastructure contract from UnitedHealth Group spanning an average of five years, and another deal from an unnamed client. Mid-sized software services firm Coforge Ltd also clinched a $1.56 billion contract, its largest, in March last year.
“Most of these mega deals are increasing because IT vendors are going after consolidation deals,” said Ashutosh Sharma, vice-president, research director at Forrester. “They are promising more productivity by lowering their pricing to transform the clients’ IT infrastructure. This way, they are in turn trying to grab more revenue share.”
Sharma expects margins to continue shrinking across the board. “Traditional IT services like coding, application management, and call centre support will shrink in margins. These will be offset by new services led by AI platforms that are not low in margin.”
The last time the companies won more mega deals was in the July-September 2023 period–one each by TCS and HCL Tech, and two by Infosys.
Pick-up after a lull
The recent surge in such deals followed a lull in 2024, and came amid uncertainty over US tariffs and geopolitical tensions in 2025. The last big-ticket contract came in January 2024 when TCS won a $2.5 billion, 15-year IT modernization deal from Aviva.
“We are seeing large AI-led service transformation, net new deals happening, and service transformation increasingly becoming core to decision-making in every pursuit,” said C Vijayakumar, chief executive of HCLTech, during the company’s post-earnings analyst call on 12 January. “Certain use cases like AI-led legacy modernization are also creating niche interest amongst our clients.”
HCLTech reported advanced AI revenue of $146 million, up 19.9% sequentially in constant currency terms, in the December quarter. Advanced AI includes Agentic AI, physical AI, robotics, and large-scale data-centre. Constant-currency numbers do not factor in exchange rate fluctuations.
TCS also expects a ramp-up in large automation deals.
“We see the innovate-to-build cycle accelerating sharply, with over three times more rapid builds that we delivered for our customers this quarter,” said Aarthi Subramanian, chief operating officer of TCS, during the company’s post-earnings analyst call on 12 January.
TCS ended last year with $1.8 billion in annualised AI revenue and Gen AI is its fastest-growing vertical, with 17.3% quarterly growth in constant currency.
Subramanian outlined a two-pronged AI strategy: “First, ‘Get AI ready’: Partner with them to build a strong enterprise technology foundation required for their AI transformation. Secondly, ‘Lead with AI’: Engage with business and technology teams to help them establish early competitive advantage in AI.”
However, Peter Bendor-Samuel, founder of research firm Everest Group, called these contracts vendor-consolidation deals, citing that “we have yet to see a large amount of work driven by AI transformation”.
“The industry talks a lot about AI and signing work related to it. However, most of this work is about applying AI to their code generation, not using AI to transform their customers' business,” he said. “It’s true there is some of this work, but it is small in comparison to the bulk of what they are doing.”
Mega deals bring margin concerns
IT firms have also been facing questions about profitability and margins since the previous deal surge in 2023.
The last spike in mega deals saw Infosys bag an IT modernization project worth $1.6 billion with Liberty Global in August 2023. Around the same time, HCLTech won a $2.1 billion managed services contract from Verizon. TCS got a $1 billion contract from Jaguar Land Rover in September 2023, whereas Infosys bagged a $1.5 billion deal with an unnamed global client.
TCS also bagged mega deals from the UK National Employment Savings Trust, and the state-run Bharat Sanchar Nigam Ltd in the April-June 2023 period. Infosys secured a large contract from British Petroleum during the same period, while Cognizant was awarded a mega deal by CoreLogic in January that year.
Telecom companies awarded four mega deals to IT outsourcers over the past three years, while healthcare and life sciences companies were the second-largest spenders.
Yet, analysts flagged concerns about TCS’s “thin” margins from the BSNL deal, while also questioning Infosys and HCLTech about upfront costs due to the ramp-up in mega contracts. IT vendors generally have to invest in talent, infrastructure, and IT hardware at the beginning of such projects, inflating one-time costs and reducing margins.
Infosys’s margins narrowed by 30 basis points to 20.7% in FY24. While HCLTech’s operating margins were unchanged at 18.2% for that fiscal. TCS reported an improvement of 50 basis points to 24.6%. One basis point is a hundredth of a percentage point.