Brokerages disagree about the future of IT as AI automates routine tasks

Analysts have mixed opinions about the long-term future of IT services companies after Anthropic introduced AI software plugins that can automate tasks in areas like finance, research, and human resources.

Some analysts believe these AI tools could reduce the need for traditional IT services and affect revenue growth. Others say AI will actually create more opportunities for service providers by expanding the overall technology market.

Analysts at JPMorgan Chase said AI will become another tool for companies, similar to offshore labour, enterprise software, and cloud computing in the past. According to them, IT service firms will still be necessary because enterprises need experts to integrate AI systems, manage data, and ensure they work correctly with existing technology. They described IT service providers as the “plumbers” of the technology world who keep systems running smoothly.

However, analysts from Jefferies warned that AI could significantly affect application-managed services, which currently generate about 22%–45% of revenue for Indian IT companies. The brokerage expects “sharp revenue deflation” in this segment as AI tools become more capable. As a result, Jefferies downgraded several Indian IT stocks including Infosys, HCLTech, Mphasis, LTIMindtree, Tata Consultancy Services, and Hexaware Technologies. It expects the sector’s earnings to grow about 6% annually until 2028, which is below current market estimates.

Motilal Oswal Financial Services said around 12%–15% of the IT sector’s revenue is directly exposed to AI-driven productivity improvements or job displacement. In a scenario where pricing pressure increases over the next 12–18 months, the firm expects about a 10% reduction in earnings-per-share estimates.

At the same time, analysts noted that most enterprise companies are still in early stages of AI adoption. Around 90% of token usage from OpenAI currently comes from startups rather than large enterprises. Large companies still require extensive integration work, data preparation, and governance before AI can be fully deployed.

Kotak Institutional Equities said demand in the IT services sector remains steady for now, though AI may bring pricing pressure as technologies move from testing stages to real-world deployment. The firm believes IT services companies will remain relevant, but their future growth will depend on how quickly they develop new AI-related revenue streams.

Meanwhile, analysts at HSBC argued that traditional enterprise software companies may benefit the most from the AI boom. They said current foundation models have limitations and cannot completely replace enterprise software platforms. According to HSBC, the software industry could see major expansion over the next 5–10 years as AI technologies are integrated into the global economy.