Why IT sector may face tough year ahead – Kotak warns AI gains can’t offset revenue deflation for TCS, Infosys, HCLTech

Is AI emerging as a double-edged sword for the IT sector? While companies are seeing rapid growth in AI-related business, it is also creating deflationary pressure in traditional IT services by reducing development volumes and increasing pricing pressure. As a result, Kotak Institutional Equities expects the sector to face another challenging year.

“IT companies will face headwinds from another year of moderate growth, pricing pressure in the base business, AI-related investments and transition costs in deal ramp-ups,” Kotak added.