Indian IT firms turn to M&A as AI reshapes the services model

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TL;DR:

Indian IT firms are directing billions into AI, cloud and specialised technology acquisitions as automation challenges the traditional headcount-led services model. The deals matter because future growth increasingly depends on intellectual property, specialised talent and AI capabilities rather than workforce scale alone.

Article:

Indian IT services companies are accelerating acquisitions in artificial intelligence, cloud, cybersecurity and digital engineering, using M&A to acquire capabilities faster as AI puts pressure on the industry’s traditional people-intensive growth model.

India’s top 10 IT services companies spent nearly $4.5 billion, roughly ₹38,000 crore at current exchange rates, on acquisitions in the first half of 2026, according to a Moneycontrol analysis. Separately, UnearthInsight estimated that Indian IT firms invested about $5.5 billion across 19 acquisitions in FY26, with many transactions aimed at acquiring specialised talent, intellectual property and platforms rather than simply adding revenue or employees.

The pattern is visible across the sector. Wipro completed its acquisition of Mindsprint in May, strengthening its domain and IP-led capabilities in food, agriculture, supply chains and commodity trading. Infosys announced an agreement in March to acquire Optimum Healthcare IT, adding healthcare consulting and digital-transformation expertise.

TCS, historically more reliant on organic growth, is also signalling a broader build-partner-acquire strategy. Its FY26 annual report says acquisitions will be used to fill capability gaps and accelerate AI capabilities. In July, the company reported annualised AI revenue of $2.6 billion, up 13.6% quarter-on-quarter.

The shift reflects a deeper change in technology dealmaking. Grant Thornton Bharat said Q1 2026 technology M&A value rose more than threefold quarter-on-quarter to $2.6 billion, even as transaction volumes remained at 21 deals. “AI, particularly generative AI, is becoming central to investment decisions,” said Raja Lahiri, Partner and Technology Industry Leader at Grant Thornton Bharat.

The strategic question now is execution. Buying AI expertise can compress years of capability building, but expensive acquisitions only create value if Indian IT companies convert specialist talent and technology into repeatable revenue. As AI weakens the old link between headcount and growth, investors may increasingly judge IT firms by what their technology can produce, not how many people they employ.