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What is the story about?
Artificial intelligence has decisively shifted from being a perceived threat to a powerful growth driver for India’s IT services industry, and HCLTech believes it is already ahead of the curve. Riding on its early investments, the company expects its advanced AI-led businesses—virtually non-existent a few years ago—to scale up to $2–2.5 billion in revenue over the next two to three years, according to Managing Director and CEO C Vijayakumar.
Speaking to CNBC-TV18 on the sidelines of the World Economic Forum 2026 at Davos, Vijayakumar said the company’s strong recent performance has reinforced confidence in a future shaped not by incremental efficiency gains, but by entirely new AI-driven service lines.
HCLTech, currently the fastest-growing large-cap IT services firm for the fourth consecutive year, has reported $148 million in advanced AI revenue, making it one of the first Indian IT players to separately call out monetisation from AI at scale.
AI flips the Indian IT narrative
A year ago, AI was widely viewed as a disruptive force that could cannibalise traditional IT revenues and compress margins. That mood has now turned decisively more optimistic.
“AI is a big inflection point in the industry, but we’ve been very proactive in transforming our services without worrying about deflation or cannibalisation,” Vijayakumar said. “That approach has landed very well with clients.”
While some legacy services may face pricing pressure, HCLTech expects higher wallet share and fresh discretionary spending on AI to more than offset any deflation.
The ‘AI factory’ opportunity: A billion-dollar bet
At the heart of HCLTech’s AI strategy is what Vijayakumar calls the “AI factory”—a full-stack services opportunity emerging from the massive capital expenditure cycle underway in global technology.
With close to $1 trillion of capex planned or already deployed across hyperscalers and large enterprises, companies need end-to-end services ranging from data centre planning and GPU infrastructure to professional and managed services.
“This AI factory business is still small today—probably under $100 million—but we believe it can scale to a billion-dollar revenue stream in three to four years,” Vijayakumar said.
The opportunity, he noted, plays directly to HCLTech’s strengths in infrastructure services and long-term client engagement, positioning the company as a critical partner in the AI buildout.
Physical AI: From software to the real world
Beyond AI factories, HCLTech is also betting big on physical AI, a fast-emerging area that extends AI beyond software into the physical world.
Physical AI combines robotics, vision systems and AI-infused workflows to enable machines to sense, understand and act on real-world environments—spanning use cases such as warehouse automation, port management and industrial operations.
“Analysts talk about physical AI being a trillion-dollar industry by 2030,” Vijayakumar said. “From a services perspective, this too can be another billion-dollar opportunity for us.”
The company’s long-standing engineering and mechatronics capabilities give it a natural edge as enterprises move from digital transformation to physical automation.
New services, new business models
Crucially, Vijayakumar stressed that the growth HCLTech is targeting is not merely AI-enabled modernisation of existing IT contracts, but entirely new service categories that attract fresh discretionary spending.
To capture value, the company is also rethinking commercial models. As AI automates workflows end to end, traditional time-and-material pricing is giving way to outcome-based contracts, where clients pay for measurable improvements in speed, efficiency and experience.
“That’s where the real value lies,” he said, citing examples such as same-day processing of employee claims using AI-driven automation.
Also Read | Physical AI to become $1 trillion industry by 2030: HCLTech’s Vijayakumar
M&A, talent and the road ahead
To accelerate its AI push, HCLTech remains open to acquisitions and talent buys, particularly in physical AI, agentic AI and AI-led services. “Speed is critical in this space,” Vijayakumar said.
On the workforce front, the emphasis is shifting from scale to skill. While the company hired over 10,000 freshers in the first nine months of the year, the focus is increasingly on elite engineers with the aptitude to work on advanced AI systems.
Taken together, HCLTech’s strategy underscores a broader reset underway in Indian IT—one where growth is driven less by headcount expansion and more by owning high-value AI platforms and services.
As Davos discussions highlight, AI may be reshaping global technology—but for Indian IT services, it is fast becoming the next big growth engine rather than an existential threat.
Below is the excerpt of the interview.
Q: You’re speaking to me after a very strong performance, not just for the last quarter but for the year. You continue to be industry-leading in terms of growth. How confident do you feel about being able to better that?
Vijayakumar: Of course, we are very happy with the performance, but what we are truly excited about is the opportunity that’s ahead of us. While AI is a big inflection point in the industry, we have been very proactively looking at how to transform our services without worrying about any potential deflation or cannibalisation of existing revenue streams. I think that proactive approach has helped us land very well with our clients in transforming existing services.
What’s even more exciting is a lot of completely new opportunities. For example, in the tech vertical, there is close to a trillion dollars of capex. Some of it is already done and some of it is in the anvil. Every one of these big programmes will need significant services in terms of planning data centres, professional services, GPU infrastructure, and the managed services around that. That’s what we call the AI factory. That’s a brilliant, very big opportunity. It could very easily be a billion-dollar revenue stream for us in the coming years.
There are many such revenue streams that we’ve identified. It’s still early days, but we have some head start, and that’s why we’re calling out our advanced AI revenue.
Q: So, let’s double down on that. You said these could potentially be billion-dollar revenue opportunities for you in the coming years. Could you give me a more definitive timeline? And you also said you’ve identified a bunch of these opportunities. What would those be?
Vijayakumar: I started by talking about the AI factory. It’s a very small service line within the $150 million, which is about $600 million in annualised revenue. It’s probably less than $100 million today. We think it can get to a billion-dollar kind of revenue stream in three to four years.
Similarly, physical AI is again a very, very big theme. While a lot of things have been talked about in agentic and AI in software development and operations, physical AI is all about AI’s ability to sense, understand, and act with respect to physical objects—whether it’s warehouse management, port management, vision systems, and so on. That’s what we call physical AI. It’s robotics plus AI-infused workflows.
This is very well placed within our engineering heritage because we’ve been working with many of these companies on mechatronics and other areas. Now it logically extends itself. Analysts talk about physical AI being a trillion-dollar industry by 2030. If I look at the services where we can play, that too can be another billion-dollar opportunity.
We are identifying completely new areas that are not part of traditional IT services. While existing business will see some deflation, you can grow wallet share and offset that. These new opportunities are really exciting.
Q: This $145 million revenue number for advanced AI that you’ve reported—what could this number look like a few years down the line?
Vijayakumar: We are thinking that in the next two to three years, we should get to $2–2.5 billion in size on these completely new service lines. These were not existing earlier. This is not about modernising existing services through AI. These are completely new discretionary spend areas.
Q: I want to understand how things are changing from a commercial model point of view—pricing, as you bring more AI into the fold, between humans and agents. How does the pricing model change?
Vijayakumar: It’s still evolving, and there’s no single silver bullet on pricing. But at a conceptual level, moving all work to outcome-based engagements is where the value is. Instead of time and material or even output-based pricing, can we focus on outcomes?
Take a simple example: employee claims settlement. Someone submits a claim and gets reimbursed after a week. With AI, the receipt can be read automatically, categorised, validated, and the payment done the same day or next day. If you can commit to delivering claims within a day, you remove a lot of clutter from the system. That’s focusing on the end-to-end value chain. Outcome-based constructs are key.
Q: In this pivot to outcome as a service, what does it mean for capabilities, hiring, and also the impact of the Labour Code? Is that a one-time impact or something ongoing?
Vijayakumar: On the Labour Code, a significant part is a one-time provision. On an ongoing basis, it will have a hit on our cost structure—about 10 to 20 basis points.
On outcome as a service, it’s not just about technology or agentic. It’s about understanding and reimagining business processes so they truly leverage AI to deliver superior experiences and better cycle times. Strong process and business understanding, in addition to technical capabilities, is critical.
Q: Will you look more actively at acquisitions to bolster capabilities?
Vijayakumar: Certainly. In areas like physical AI, agentic, and AI-led services, we are always on the lookout—either to hire top talent or acquire capabilities that strengthen our offering. Speed is critical in this space, so we’re constantly looking.
Q: What happens from a workforce point of view as Indian IT services companies move up the value chain?
Vijayakumar: The emphasis is shifting from quantity to quality. In the first nine months of this year, we hired over 10,000 freshers, but we’re focused on elite engineers with higher aptitude, faster learning ability, and ambition to use these technologies. That’s where traction will be.
Watch accompanying video for entire conversation.
Speaking to CNBC-TV18 on the sidelines of the World Economic Forum 2026 at Davos, Vijayakumar said the company’s strong recent performance has reinforced confidence in a future shaped not by incremental efficiency gains, but by entirely new AI-driven service lines.
HCLTech, currently the fastest-growing large-cap IT services firm for the fourth consecutive year, has reported $148 million in advanced AI revenue, making it one of the first Indian IT players to separately call out monetisation from AI at scale.
AI flips the Indian IT narrative
A year ago, AI was widely viewed as a disruptive force that could cannibalise traditional IT revenues and compress margins. That mood has now turned decisively more optimistic.
“AI is a big inflection point in the industry, but we’ve been very proactive in transforming our services without worrying about deflation or cannibalisation,” Vijayakumar said. “That approach has landed very well with clients.”
While some legacy services may face pricing pressure, HCLTech expects higher wallet share and fresh discretionary spending on AI to more than offset any deflation.
The ‘AI factory’ opportunity: A billion-dollar bet
At the heart of HCLTech’s AI strategy is what Vijayakumar calls the “AI factory”—a full-stack services opportunity emerging from the massive capital expenditure cycle underway in global technology.
With close to $1 trillion of capex planned or already deployed across hyperscalers and large enterprises, companies need end-to-end services ranging from data centre planning and GPU infrastructure to professional and managed services.
“This AI factory business is still small today—probably under $100 million—but we believe it can scale to a billion-dollar revenue stream in three to four years,” Vijayakumar said.
The opportunity, he noted, plays directly to HCLTech’s strengths in infrastructure services and long-term client engagement, positioning the company as a critical partner in the AI buildout.
Physical AI: From software to the real world
Beyond AI factories, HCLTech is also betting big on physical AI, a fast-emerging area that extends AI beyond software into the physical world.
Physical AI combines robotics, vision systems and AI-infused workflows to enable machines to sense, understand and act on real-world environments—spanning use cases such as warehouse automation, port management and industrial operations.
“Analysts talk about physical AI being a trillion-dollar industry by 2030,” Vijayakumar said. “From a services perspective, this too can be another billion-dollar opportunity for us.”
The company’s long-standing engineering and mechatronics capabilities give it a natural edge as enterprises move from digital transformation to physical automation.
New services, new business models
Crucially, Vijayakumar stressed that the growth HCLTech is targeting is not merely AI-enabled modernisation of existing IT contracts, but entirely new service categories that attract fresh discretionary spending.
To capture value, the company is also rethinking commercial models. As AI automates workflows end to end, traditional time-and-material pricing is giving way to outcome-based contracts, where clients pay for measurable improvements in speed, efficiency and experience.
“That’s where the real value lies,” he said, citing examples such as same-day processing of employee claims using AI-driven automation.
Also Read | Physical AI to become $1 trillion industry by 2030: HCLTech’s Vijayakumar
M&A, talent and the road ahead
To accelerate its AI push, HCLTech remains open to acquisitions and talent buys, particularly in physical AI, agentic AI and AI-led services. “Speed is critical in this space,” Vijayakumar said.
On the workforce front, the emphasis is shifting from scale to skill. While the company hired over 10,000 freshers in the first nine months of the year, the focus is increasingly on elite engineers with the aptitude to work on advanced AI systems.
Taken together, HCLTech’s strategy underscores a broader reset underway in Indian IT—one where growth is driven less by headcount expansion and more by owning high-value AI platforms and services.
As Davos discussions highlight, AI may be reshaping global technology—but for Indian IT services, it is fast becoming the next big growth engine rather than an existential threat.
Below is the excerpt of the interview.
Q: You’re speaking to me after a very strong performance, not just for the last quarter but for the year. You continue to be industry-leading in terms of growth. How confident do you feel about being able to better that?
Vijayakumar: Of course, we are very happy with the performance, but what we are truly excited about is the opportunity that’s ahead of us. While AI is a big inflection point in the industry, we have been very proactively looking at how to transform our services without worrying about any potential deflation or cannibalisation of existing revenue streams. I think that proactive approach has helped us land very well with our clients in transforming existing services.
What’s even more exciting is a lot of completely new opportunities. For example, in the tech vertical, there is close to a trillion dollars of capex. Some of it is already done and some of it is in the anvil. Every one of these big programmes will need significant services in terms of planning data centres, professional services, GPU infrastructure, and the managed services around that. That’s what we call the AI factory. That’s a brilliant, very big opportunity. It could very easily be a billion-dollar revenue stream for us in the coming years.
There are many such revenue streams that we’ve identified. It’s still early days, but we have some head start, and that’s why we’re calling out our advanced AI revenue.
Q: So, let’s double down on that. You said these could potentially be billion-dollar revenue opportunities for you in the coming years. Could you give me a more definitive timeline? And you also said you’ve identified a bunch of these opportunities. What would those be?
Vijayakumar: I started by talking about the AI factory. It’s a very small service line within the $150 million, which is about $600 million in annualised revenue. It’s probably less than $100 million today. We think it can get to a billion-dollar kind of revenue stream in three to four years.
Similarly, physical AI is again a very, very big theme. While a lot of things have been talked about in agentic and AI in software development and operations, physical AI is all about AI’s ability to sense, understand, and act with respect to physical objects—whether it’s warehouse management, port management, vision systems, and so on. That’s what we call physical AI. It’s robotics plus AI-infused workflows.
This is very well placed within our engineering heritage because we’ve been working with many of these companies on mechatronics and other areas. Now it logically extends itself. Analysts talk about physical AI being a trillion-dollar industry by 2030. If I look at the services where we can play, that too can be another billion-dollar opportunity.
We are identifying completely new areas that are not part of traditional IT services. While existing business will see some deflation, you can grow wallet share and offset that. These new opportunities are really exciting.
Q: This $145 million revenue number for advanced AI that you’ve reported—what could this number look like a few years down the line?
Vijayakumar: We are thinking that in the next two to three years, we should get to $2–2.5 billion in size on these completely new service lines. These were not existing earlier. This is not about modernising existing services through AI. These are completely new discretionary spend areas.
Q: I want to understand how things are changing from a commercial model point of view—pricing, as you bring more AI into the fold, between humans and agents. How does the pricing model change?
Vijayakumar: It’s still evolving, and there’s no single silver bullet on pricing. But at a conceptual level, moving all work to outcome-based engagements is where the value is. Instead of time and material or even output-based pricing, can we focus on outcomes?
Take a simple example: employee claims settlement. Someone submits a claim and gets reimbursed after a week. With AI, the receipt can be read automatically, categorised, validated, and the payment done the same day or next day. If you can commit to delivering claims within a day, you remove a lot of clutter from the system. That’s focusing on the end-to-end value chain. Outcome-based constructs are key.
Q: In this pivot to outcome as a service, what does it mean for capabilities, hiring, and also the impact of the Labour Code? Is that a one-time impact or something ongoing?
Vijayakumar: On the Labour Code, a significant part is a one-time provision. On an ongoing basis, it will have a hit on our cost structure—about 10 to 20 basis points.
On outcome as a service, it’s not just about technology or agentic. It’s about understanding and reimagining business processes so they truly leverage AI to deliver superior experiences and better cycle times. Strong process and business understanding, in addition to technical capabilities, is critical.
Q: Will you look more actively at acquisitions to bolster capabilities?
Vijayakumar: Certainly. In areas like physical AI, agentic, and AI-led services, we are always on the lookout—either to hire top talent or acquire capabilities that strengthen our offering. Speed is critical in this space, so we’re constantly looking.
Q: What happens from a workforce point of view as Indian IT services companies move up the value chain?
Vijayakumar: The emphasis is shifting from quantity to quality. In the first nine months of this year, we hired over 10,000 freshers, but we’re focused on elite engineers with higher aptitude, faster learning ability, and ambition to use these technologies. That’s where traction will be.
Watch accompanying video for entire conversation.
