Mid-tier Indian IT firms, including Persistent Systems, Coforge, and Mphasis, are gradually moving away from the traditional growth model tied to headcount. Their latest quarterly results show that revenue growth is now surpassing hiring, indicating a shift towards AI-driven productivity and efficiencies from automation.
This change represents how artificial intelligence (AI) and automation platforms are redefining delivery methods. Companies can now increase revenue without a corresponding rise in workforce numbers.
Decoupling Growth from Workforce Expansion
The September quarter marked a significant change. Persistent Systems’ revenue grew by 23.6% year-on-year to ₹3,580 crore, while its workforce increased by only 1.1%. Coforge experienced a 31% revenue growth, seeing just a 2% rise in headcount. Mphasis reported over 10% revenue growth even with a 2.5% decline in its workforce.
Industry experts highlight that these revenue increases were entirely organic, with no contributions from acquisitions or unusual one-time events.
Research by HFS Research ranks these companies among five “breakout providers,” which also includes Cognizant, successfully separating growth from headcount.
“(These are) early signs from a few providers that growth can finally be decoupled from headcount,” stated the HFS report by its president, Saurabh Gupta. However, the report also mentioned that these are “early signals,” with the broader industry still heavily reliant on manpower-intensive models.
Comparing Mid-Tier and Large IT Players
While mid-tier firms are leading this structural change, some larger players are starting to show signs of similar non-linear growth.
Cognizant’s revenue grew by 7.4% year-on-year in the September 2025 quarter, with a 2.8% increase in headcount—a slower hiring rate than its larger peers. In comparison:
– Infosys recorded 8.5% revenue growth with a 4.5% increase in headcount.
– HCLTech reported 10.7% revenue growth and a 3.7% headcount growth.
– Wipro had 1.8% revenue growth alongside a 0.7% rise in headcount.
On average, India’s leading IT companies saw annual revenue growth between 2% and 11%, while headcount expansion ranged from 2% to 4%. The exception was Tata Consultancy Services (TCS), India’s largest IT firm, which announced plans to cut about 2% of its workforce. Despite a 2.4% revenue increase, TCS’s headcount dropped by 3.1%, reflecting a deliberate push for operational efficiency.
The AI Factor: Driving Productivity and Profitability
Industry experts widely credit this non-linear growth to the increasing use of AI in delivery models, automation, and generative AI tools that streamline workflows, improve utilization, and optimize pricing.
“Some margin uplifts reflect structural factors like utilization, bench optimization, and sharper pricing. However, the early indicators are clear. We see more AI-driven deals, productivity gains, and platform evolution,” the HFS report noted. Persistent Systems’ CEO Sandeep Kalra highlighted this during a post-earnings call:
“Deals using AI tools or platforms need less manpower but achieve better outcomes. That is where our profitability improvement comes from.”
Similarly, Coforge CFO Saurabh Goel mentioned that revenue per employee in the company rose from $67,000 to $69,000 per year, showcasing real gains in productivity.
“There is non-linearity playing out,” Goel said, stressing how AI is driving measurable efficiency improvements.
At LTIMindtree, CFO Vipul Chandra echoed this sentiment, explaining that AI adoption helped the company increase revenue without significant headcount growth.
“We have been adding revenue this year without really having a major increase in our workforce,” he said.
Small Size, Big Advantage
While large IT firms have also begun integrating AI into their service delivery, mid-tier players seem to be seeing quicker results. Their smaller scale, limited legacy systems, and greater operational flexibility allow them to adapt faster to AI-driven changes.
“Large IT companies earn their revenue from very different business lines,” said Vineet Nayar, founder of Sampark Foundation and former CEO of HCL Technologies.
“A BPO operation makes around $12–15 an hour per employee, infrastructure management about $18–24, and digital or AI-driven projects $40 or more, all based on offshore rates. So, revenue per employee depends entirely on the business mix.”
Larger firms benefit from their scale and operational depth but face the challenge of running both legacy and digital models simultaneously.
“The real challenge is to run these two engines together,” Nayar pointed out.
In contrast, mid-tier firms like Persistent, Coforge, and Mphasis can pivot faster, experiment with AI-enabled delivery models, and adjust pricing without the limitations of large-scale legacy systems. Sumit Pokharna, VP of Fundamental Research at Kotak Securities, noted that while macroeconomic conditions are similar for all firms, the deal size that can drive growth varies.
“For mid-sized companies, smaller deals can lead to substantial growth. Their flexibility allows them to deploy either people or AI technology for projects as needed,” he said.
The AI-Led Productivity Equation
Experts agree that while AI isn’t the only reason for the current decoupling trend, it is increasingly becoming a key productivity driver in the software development lifecycle.
Pareekh Jain, founder and CEO of EIIR Trend, cautioned that it’s still too soon to attribute the revenue and headcount growth separation solely to AI.
“Their smaller size shows the impact of such changes faster than large IT companies,” he said. “But the trend is clear — AI and automation are reshaping delivery economics.”
AI-driven coding assistants, intelligent testing frameworks, and automated project management tools are enabling developers to complete projects more quickly, reduce manual efforts, and enhance realization rates, effectively boosting revenue per employee. For clients, this means shorter project cycles and better cost efficiency, making AI-enhanced deals more appealing for both sides.
A Structural Shift in the Making
Data from mid-tier firms suggests that the long-standing connection between headcount and revenue in India’s IT services sector may finally be breaking down. However, experts emphasize that the shift will take time to become widespread across the larger industry. For large IT players with diverse portfolios, transitioning to AI-driven models requires balancing existing contracts, delivery methods, and pricing expectations.
Still, the direction of change is clear. As AI becomes integrated across all phases of software development, testing, and operations, the value per engineer will continue to rise—a trend that could fundamentally alter the industry’s cost structures and client relationships.
“This isn’t just about adding AI to existing workflows,” one industry leader noted. “It’s about redesigning the delivery process itself — where productivity, not headcount, determines success.”
The Road Ahead
For now, mid-tier IT companies are revealing the potential future of IT delivery models: agile, AI-enhanced, and less dependent on workforce growth.
Persistent, Coforge, and Mphasis illustrate how combining AI integration, smarter pricing models, and operational discipline can lead to sustainable, non-linear growth.
If this trend continues, India’s IT industry—long known for its manpower scale—may soon gain recognition for its productivity and innovation efficiency instead.
