The brokerage noted that AI is likely to limit growth in the IT services market to 1.5%-3% CAGR over 2024-29 due to three key reasons.
Clients may delay IT spending on concerns of rapid AI advancements rendering current investments obsolete.
AI-led productivity gains may impact existing IT services revenues by 20% over FY25-30, while growth opportunities arising from AI may be back-ended.
Clients have not fully realised ROIs on elevated incremental tech.
The brokerage further noted that, between 2021 and 2024, average annual spending reached $280 billion, a significant increase from the $130 billion recorded over the 2016-2020 period.
“We anticipate our coverage to grow at a compound annual growth rate of 3.8% from FY25 to FY28, driven by market share gains. Among the firms, Infosys and HCL Technologies face the lowest risk of revenue deflation due to AI adoption, while mid-sized companies are exposed to higher risks,” it said.