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The global IT services industry is undergoing a structural shift due to the influence of artificial intelligence on the conventional revenue streams, as highlighted in a recent research report by Jefferies. The brokerage firm pointed out that the effect of artificial intelligence on the growth of managed services could result in revenue deflation and cyclicality, especially for Indian IT companies like Tata Consultancy Services and Infosys. The research report has emphasized the rising concerns among investors about the influence of generative artificial intelligence on the IT services industry.
Jefferies stated that AI-driven disruption in traditional IT outsourcing models is expected to shrink the managed services segment while accelerating demand for advisory and implementation work. The report emphasized that application managed services, which contribute 22–45 percent of revenues for large firms, may witness sharp pricing pressure. It also flagged risks linked to the impact of AI automation on IT outsourcing revenue, enterprise technology spending trends in 2026, and a structural shift in global IT services business models. The brokerage has cut price targets by up to 33 percent for select companies, warning that valuations may not fully reflect downside risks.
“While IT firms will remain relevant, the nature of client engagements is structurally shifting,” Jefferies said in its note titled P(AI)n Not Over Yet; Stay Selective. The firm added that rising advisory work could increase revenue cyclicality and require significant changes in talent strategy and operating models.
The warning follows market volatility triggered by advancements from Anthropic, whose Claude tools have intensified automation concerns. Shares of global firms including IBM declined sharply amid fears over legacy modernization demand. Jefferies outlined multiple growth scenarios, cautioning investors to factor structural risks into long-term expectations as AI-driven transformation accelerates.
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