Indian IT Firms Secure Record Mega Deals in Q3 Amid AI-Driven Transformation Push
Indian IT firms Cognizant, TCS, and Infosys secured three mega deals in Q3—the highest in nine quarters—driven by AI infrastructure transformation demand. Key wins include Cognizant's $1 billion Novartis contract and Infosys's $1.6 billion NHS deal. HCLTech reported $146 million in advanced AI revenue with 19.9% sequential growth, while TCS achieved $1.8 billion in annualized AI revenue. However, analysts note this reflects vendor consolidation rather than traditional outsourcing growth, with margin pressures expected to continue despite the revenue surge.
*this image is generated using AI for illustrative purposes only.
Indian IT services companies experienced their strongest quarter for mega deals in over two years, with three major contracts secured during October-December by leading firms Cognizant Technology Solutions, Tata Consultancy Services, and Infosys. This represents the highest number of mega deals in nine quarters, signaling a potential shift in the global IT services landscape driven by artificial intelligence transformation initiatives.
Major Contract Wins Drive Q3 Performance
The quarter's standout deals demonstrate the growing demand for AI-enabled infrastructure transformation services:
| Company | Deal Details | Value | Client |
|---|---|---|---|
| Cognizant | AI-led services, data and application management | $1 billion | Novartis (Switzerland) |
| Infosys | 15-year IT modernization contract | $1.6 billion | NHS (UK) |
| TCS | Mega deal (details undisclosed) | Not disclosed | North American financial institution |
Cognizant's contract with pharmaceutical giant Novartis will see the New Jersey-based, India-staffed IT outsourcer manage comprehensive AI-led services. Meanwhile, Infosys secured its NHS contract in October, marking a significant win in the healthcare sector. TCS announced its North American financial services deal during post-earnings analyst calls but did not disclose the client's identity or contract value.
AI Revenue Growth Accelerates Across Platforms
The surge in mega deals coincides with robust AI revenue growth across major IT firms. HCLTech reported advanced AI revenue of $146 million, representing 19.9% sequential growth in constant currency terms during the December quarter. The company's advanced AI portfolio encompasses Agentic AI, physical AI, robotics, and large-scale data centers.
TCS concluded the year with $1.8 billion in annualized AI revenue, with Generative AI emerging as its fastest-growing vertical, achieving 17.3% quarterly growth in constant currency. The company outlined a comprehensive two-pronged AI strategy during analyst calls:
- 'Get AI ready': Partnering with clients to build enterprise technology foundations for AI transformation
- 'Lead with AI': Engaging business and technology teams to establish competitive AI advantages
Vendor Consolidation Drives Deal Structure
Industry analysts emphasize that the current mega deal trend reflects strategic vendor consolidation rather than traditional labor-heavy outsourcing growth. "It signals a clear shift back toward platform scale transformation deals, not a return to labour-heavy outsourcing," said Phil Fersht, chief executive of HFS Research. "Large enterprises are consolidating vendors and committing to multi-year programs that combine technology modernization, AI enablement, and operating model change."
Ashutosh Sharma, vice-president and research director at Forrester, noted that "most of these mega deals are increasing because IT vendors are going after consolidation deals. They are promising more productivity by lowering their pricing to transform the clients' IT infrastructure."
Historical Context and Market Recovery
The recent surge follows a significant lull in mega deal activity during 2024. The last comparable period was July-September 2023, when companies secured similar numbers of large contracts—TCS and HCL Tech won one each, while Infosys secured two deals. Other notable recent wins include:
- Coforge: $1.56 billion contract in March (largest in company history)
- TCS: $2.5 billion, 15-year Aviva modernization deal (January 2024)
Margin Pressures and Investment Challenges
Despite revenue growth, mega deals present margin challenges due to substantial upfront investments in talent, infrastructure, and IT hardware. Historical performance data reveals mixed margin impacts:
| Company | FY24 Operating Margin | Change |
|---|---|---|
| TCS | 24.6% | +50 basis points |
| Infosys | 20.7% | -30 basis points |
| HCLTech | 18.2% | Unchanged |
Analysts expect continued margin pressure as traditional IT services face pricing compression, though new AI-platform services may offer better profitability prospects. "Traditional IT services like coding, application management, and call centre support will shrink in margins. These will be offset by new services led by AI platforms that are not low in margin," Sharma explained.
The mega deal resurgence occurs amid broader challenges including global trade uncertainty, stricter US visa scrutiny, and geopolitical tensions, suggesting that AI-driven transformation represents a critical growth avenue for Indian IT services companies navigating an evolving market landscape.
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