Tata Consultancy Services’ recent revelation that it generates around $1.5 billion in revenue from artificial intelligence-related projects was expected to reinforce optimism around the next growth cycle for India’s largest IT services firm. Instead, the disclosure has drawn a muted response from seasoned market observer Dipan Mehta, who sees little evidence that AI has fundamentally changed the earnings profile of the sector.

Speaking to CNBC TV18, Mehta, Founder Director of Elixir Equities, questioned whether AI is truly the transformational driver that markets are positioning it to be for Indian IT services companies. His scepticism is rooted not in short-term performance but in decades of observing how successive technology waves have played out in the services-led outsourcing model.

India’s IT services sector has long been viewed as a steady compounder, benefiting from global outsourcing, cost arbitrage, and recurring enterprise technology spend. Over the past few years, however, growth rates for large-cap players such as TCS have moderated, reflecting slower client spending, pricing pressure, and rising competition from global peers and in-house technology teams.

Against this backdrop, artificial intelligence has emerged as the industry’s most prominent growth narrative. Companies have highlighted AI-led deals, productivity gains, and platform-led services as potential levers to revive growth and protect margins. TCS’ disclosure that AI projects contribute roughly 5 percent of its overall revenue was positioned as proof that this transition is underway.

For Mehta, the key issue is scale and impact. While $1.5 billion is a meaningful number in absolute terms, it represents only a small portion of TCS’ total revenue base. In his view, a technological shift of AI’s magnitude should have had a far more visible effect on sector-wide revenues and profitability by now.

Drawing on his 30-year experience tracking technology stocks, Mehta remarked that major technology trends have repeatedly promised disruption but rarely translated into sustained acceleration for Indian IT services firms. As a result, his firm has reduced its focus on tracking TCS and other large-cap IT names, citing the absence of strong growth momentum.

This is not a rejection of AI as a technology, but rather a critique of how much economic value it can unlock within the current services-heavy business model.

Mehta’s comments cut against the prevailing optimism around AI-driven re-rating for IT stocks. For institutional and long-term investors, the central question is whether AI can move the needle on revenue growth, or whether it will remain incremental - helpful for efficiency and deal wins, but not transformative for earnings.

The concern is particularly relevant for market leaders like TCS, where size itself becomes a constraint. Even high-growth segments must scale rapidly to materially influence consolidated performance. Without that, valuation multiples are unlikely to expand meaningfully.

From a market perspective, Mehta does not rule out a near-term trading opportunity in IT stocks. He acknowledges that factors such as rupee depreciation, favourable base effects, and the conversion of previously won large deals into revenues could support a short-term rally. Such moves, however, are seen as cyclical rather than structural.

At the sector level, his assessment suggests that Indian IT services may increasingly be viewed as defensive holdings rather than growth engines. Reasonable valuations and strong balance sheets may offer downside protection, but the era of outsized wealth creation from large-cap IT stocks could be behind us unless growth re-accelerates sharply.

For broader context on how AI adoption is being interpreted by markets and analysts, similar discussions have been carried across financial media platforms including CNBC TV18, where the interview was aired.

Mehta’s stance is pragmatic rather than outright bearish. He suggests staying invested in software services companies to benefit from a possible bounce over the next few quarters. However, he is clear that these stocks do not qualify, in his framework, as compelling long-term growth stories at current levels.

This perspective aligns with a growing segment of the market that sees AI more as a margin-defence and efficiency tool than a catalyst for exponential growth in traditional IT services.