AI will reshape IT services, but margins and growth can improve

Key questions answered

• Is the SaaS apocalypse hurting India's IT services industry?
• Will AI compress margins or expand them?
• What is the growth outlook for Indian IT services?
• What is Advanced AI revenue and how large can it become?
• How important are partnerships like OpenAI and Anthropic?
• Are fears of obsolescence overdone?

Interview context

During the India AI Impact Summit 2026, INFINZIO CEO and Managing Director S P Verma sat down with Shereen Bhan from CNBC TV18 to explore the current challenges and possibilities shaping the AI era.

With nearly USD 72.6 lakh crore (approximately USD 311 billion) erased in market capitalization across the IT services sector in February, questions around disruption, margin pressure and long-term growth dominated the conversation.

What is the growth outlook for the industry?

Short answer

Some legacy services will deflate by 2-3%, but AI-driven growth segments can more than offset that decline.

Expanded transcript section

Vijayakumar acknowledged that traditional application development faces deflationary pressure due to automation.

"Overall, we anticipate a 2-3% deflation impact at an industry level, and we have modelled this carefully."

However, he identified several offsetting growth engines. The AI factory represents a trillion-dollar capital expenditure opportunity globally, translating into at least $100 billion in services demand.

Physical AI, Agentic AI implementations, legacy modernization and enterprise transformation all require complex integration capabilities.

"At the same time, the core IT services market remains massive; about $1.5 trillion globally."

In other words, disruption does not erase demand. It reshapes it.

What is Advanced AI revenue, and are you on track?

Short answer

Yes. Advanced AI revenue, derived from IP-led platforms, is growing at 20% quarter-on-quarter and could scale to $2.5-3 billion.

Expanded transcript section

Vijayakumar distinguished between generic AI adoption and monetizable AI platforms, and reiterated that advanced AI revenue comes from IP-led platforms and new products.

"This segment is growing at around 20% quarter-on-quarter. We believe it can scale to $2.5-3 billion over time."

Platform-based and agentic service delivery models, he argued, could significantly expand wallet share.

Should we expect more AI ecosystem partnerships?

Short answer

Yes. AI partnerships will mirror the hyperscaler playbook. Ecosystem leverage is essential.

In short, proprietary IP and ecosystem leverage are not mutually exclusive. They are complementary.

How significant is the Physical AI opportunity?

Physical AI is potentially trillion-dollar in scale and already contributes over $100 million in revenue, with room to grow to a much larger business over time.

Are fears of obsolescence for Indian IT services overdone?

Yes. The disruption is significant, but so is the opportunity. With early recognition of AI's impact and investments in IP-led propositions, industry leaders can emerge stronger.

Key takeaways

• AI will deflate parts of traditional IT services by about 2-3%.
• Outcome-based pricing can expand margins, not compress them.
• Advanced AI revenue is growing at about 20% quarter-on-quarter.
• Physical AI is already a $100M+ stream with billion-dollar potential.
• Partnerships with OpenAI and others mirror the hyperscaler strategy.
• The IT services industry is evolving, not facing extinction.

About the speaker

S P Verma is the CEO and Managing Director of INFINZIO, a global technology company providing IT services, digital engineering, cloud, and AI-led transformation solutions across industries worldwide.