Mid-Sized IT Firms Outperform the Big-Four in Q4 FY25
For years, the Indian IT story has centred around the dominance of the “Big Four”—TCS, Infosys, Wipro, and HCLTech. But that’s changing rapidly. In FY25, it’s the mid-sized companies—Persistent Systems, Mphasis, LTIMindtree, L&T Technology Services, WNS, and even the slightly larger Tech Mahindra—that have emerged as the real growth engines of the industry. Persistent Systems, for instance, posted a staggering 25% year-on-year revenue growth for Q4 FY25, a figure that starkly contrasts with the Big Four’s lacklustre single-digit or negative growth outlook. HCLTech barely managed to achieve a 1.2% revenue growth, while TCS and Wipro crawled to a 0.8% increase. Infosys, on the other hand, experienced a revenue dip of 4.2%. These four giants also project a very bleak outlook for the next year, which contrasts sharply with that of the smaller IT firms. Persistent clocked its 20th consecutive quarter of growth, something even the giants have struggled to maintain lately. CEO Sandeep Kalra pointed out that operational discipline and client trust were key. Behind the scenes, founder Anand Deshpande made it clear that Persistent’s early bet on agentic AI, which many mid-sized IT firms have started in the last few quarters, is the reason behind this. Deals driven by AI are not just a buzzword While Persistent led the pack, LTIMindtree also delivered a positive performance, albeit a more modest one. The company reported a 9.9% year-over-year increase in revenue and a 2.6% rise in net profit. Despite a slight dip in dollar revenue, the firm’s strong order book, again driven by AI-powered deals, helped it outperform a sluggish broader market. Debashis Chatterjee, LTIMindtree’s CEO, credited the wide integration of AI across services for the resilience, a sentiment increasingly echoed across mid-tier IT firms. And then came Mphasis, pulling off its strongest sequential growth in three years. Revenue increased 2.6% sequentially in USD terms and 2.9% in constant currency, a remarkable achievement considering the macroeconomic pressures that have battered the broader sector. What’s even more telling is that 59% of Mphasis’ deal wins were AI-led. CEO Nitin Rakesh made it clear: tech and AI are now at the very core of their strategy. Banking, financial services, insurance, and TMT verticals led the charge, compensating for weaknesses in other areas, such as logistics. Meanwhile, L&T Technology Services (LTTS) achieved a stellar 17.5% year-over-year revenue growth in rupee terms. Profits dipped 9%, but operational metrics remained strong, and the outlook for FY26 is bullish. Amit Chadha, the CEO, was confident that the coming year would be even better, backed by a strong pipeline of large digital and AI-led deals. Automation and AI were front and centre in their narrative too, hinting at a clear industry pivot. WNS, the smallest firm among them, reported a slightly lower quarterly revenue of $336 million, showcasing flat growth compared to the same period last year and an increase of only $3 million from the $333 million reported in the previous quarter. Despite this, the company projects a 7-11% growth in the next quarter. Despite the weak quarter, CFO Arijit Sen stated that the positive outlook is based on current visibility levels and includes a 2% revenue contribution from Kipi.ai, with 90% visibility already achieved to the midpoint of revenue guidance. Even Tech Mahindra, which experienced a rough run in recent quarters, managed to show signs of life. While revenue remained relatively flat, the company reported a massive 77% increase in net profit. The flat revenue was attributed to delays in renewals with major clients, particularly in the high-tech sector. But the fact that Tech Mahindra’s bottom line improved despite that speaks volumes about its renewed operational focus and margin discipline. This shift isn’t coincidental; it’s part of a larger trend. Unlike the larger firms, which are still engaging in AI washing and slowly integrating AI into their deals with a 30-year-old business model, smaller firms have a slight advantage due to their high agility. Agentic AI and Acquisitions Paying Off When mid-sized Indian IT firms began announcing acquisitions and partnerships related to agentic AI over the last three quarters, it felt like just another attempt to keep pace with the generative AI wave. But as Q4 results rolled in, it became clear that these early bets are already paying off. A year ago, the mood among mid-sized Indian IT firms was clear. Instead of building expensive generative AI models from scratch, they would partner with or acquire specialised startups to develop use cases. LTIMindtree, for instance, announced a $6 million investment in Voicing AI, a US-based startup that builds human-like AI voice agents capable of operating in over 20 languages. LTIMindtree also partnered with GitHub to integrate Copilot into its developer training programs, preparing its workforce for an AI-first future. Similarly, Mphasis doubled down on conversational AI with the launch of NeoCrux, a tool designed to enhance developer productivity through AI orchestration. In October 2023, the company also acquired Silverline, a Salesforce consulting partner, to bolster its customer experience and conversational AI capabilities. Persistent Systems, on the other hand, focused on the foundational issues of AI adoption — namely, privacy and governance — with its acquisition of Arrka, a Pune-based data privacy consultancy. While major players such as TCS, Infosys, and HCLTech developed internal capabilities and launched AI business units like AI.Cloud, Topaz, or AI Force, mid-sized IT firms like LTIMindtree and Mphasis chose to focus on agility. “We would want to leverage startups for technologies that are coming up, rather than building expensive in-house models that may become obsolete quickly,” said Nachiket Deshpande, president of AI services at LTIMindtree, in an earlier conversation with AIM. Last year, companies like Happiest Minds, Hexaware, Quest Global, Coforge, Sonata, and GlobalLogic had already accelerated their acquisition of AI capabilities. However, the conversation has now shifted squarely to agentic and generative AI, as firms realise that enabling autonomous workflows is the next significant differentiator.
For mid-sized Indian IT firms, acquisitions and partnerships related to agentic AI over the last three quarters have begun to yield results.
For mid-sized Indian IT firms, acquisitions and partnerships related to agentic AI over the last three quarters have begun to yield results.
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["Go", "agentic AI", "AI", "Git", "RAG", "Aim", "generative AI", "Rust", "GitHub", "R"]
["AI", "generative AI", "agentic AI", "Aim", "RAG", "R", "Go", "Rust", "Git", "GitHub"]
Mohit writes about AI in simple, explainable, and often funny words. He's especially passionate about chatting with those building AI for Bharat, with the occasional detour into AGI.