Mid-cap Indian IT services firms, with revenues between $1-2 billion, grew faster than the country’s largest outsourcers in the last fiscal year and expressed greater confidence in AI-driven opportunities. Executives from companies like Coforge, Mphasis, and Persistent Systems attributed their resilience to nimble structures and domain expertise, contrasting with the cautious tone of larger peers such as Infosys and HCLTech, which warned of AI’s deflationary impact during recent earnings calls.
The optimism among mid-cap IT firms stems from their ability to adapt quickly to AI advancements. Executives cited fewer organizational layers and deeper domain expertise as key advantages. Sudhir Singh, CEO of Coforge, stated during the company’s post-earnings press conference on May 7 that AI-driven demand is expanding the market, requiring multiple players to address new opportunities. This contrasts with larger firms, which have flagged concerns about AI’s disruptive potential and competitive pressures.
Large IT services firms, including Infosys and Tech Mahindra, have adopted a more guarded stance on AI. Mohit Joshi, CEO of Tech Mahindra, highlighted vendor fatigue and concerns about cutting-edge work during the company’s April 22 analyst call. He noted that clients worry IT services firms may hesitate to offer innovative solutions for fear of cannibalizing existing business, particularly in sectors like retail. This cautious outlook reflects broader industry anxieties about AI’s long-term impact on traditional service models.
A key difference between mid-cap and large IT firms lies in how they handle AI-driven productivity savings. Nitin Rakesh, CEO of Mphasis, explained during the company’s Q4 analyst call on April 30 that his firm passes only a portion of AI savings to clients, reinvesting the remainder into expanded project scopes, automation, and modernization. This approach contrasts with larger firms, which have signaled a more conservative stance on sharing AI efficiencies with clients.
The divergent views on AI come as the Indian IT sector, valued at $297 billion, grapples with rapid technological advancements. Mid-cap firms argue that their agility allows them to capitalize on AI opportunities faster than larger competitors, which often face bureaucratic hurdles. This nimbleness has translated into stronger growth, with mid-cap firms outpacing the big six IT services companies in the last fiscal year, according to industry executives.
Despite the optimism, mid-cap firms acknowledge the challenges of competing in an AI-driven landscape. Executives emphasize the need for continuous upskilling and investment in AI capabilities to maintain their edge. Coforge’s Singh noted that the market is expanding, but firms must demonstrate value beyond cost savings to retain clients. This sentiment aligns with broader industry trends, where AI adoption is reshaping client expectations and service delivery models.
The cautious outlook from large IT firms reflects their exposure to legacy contracts and larger workforces, which can slow AI adoption. Infosys and HCLTech, for instance, have warned of AI’s deflationary impact on pricing and margins during recent earnings calls. Analysts suggest that larger firms may face greater pressure to renegotiate contracts and reskill employees, while mid-cap firms benefit from smaller, more flexible teams and specialized domain expertise.
Investors and clients are closely monitoring the IT sector’s response to AI, with mid-cap firms positioning themselves as agile partners capable of delivering innovative solutions. The contrasting narratives between mid-cap and large firms highlight the broader industry shift toward AI-driven services. As the sector evolves, firms that can balance cost efficiency with technological innovation are likely to emerge as leaders in the AI era.