According to CLSA analysis, SaaS companies are gaining market share over IT services in the AI era, with most SaaS firms raising guidance and delivering stable earnings growth. By contrast, the majority of Indian IT service companies have cut guidance, highlighting the divergent impact of AI adoption across different IT segments. Snowflake raised its revenue-growth guidance to 31% from 27%, while Datadog increased its forecast to $4.45-4.47 billion from $4.3-4.34 billion. Salesforce has infused Claude into its platform and launched Claudeforce, resulting in significant stock rerating. The distinction between SaaS platforms varies significantly - systems of record like SAP, Snowflake, Guidewire and Salesforce's core CRM are less vulnerable to direct replacement because they require accurate, consistent outputs, while systems of engagement and workflows face greater disruption risk as AI can directly substitute their outputs.
The IT services industry continues to face significant uncertainty as investors remain divided over artificial intelligence's ultimate impact on the sector. According to CNBC TV18, Capgemini Chief Executive Aiman Ezzat stated that the industry hasn't fully emerged from this challenging period, with mixed views still prevalent among investors regarding AI's long-term effects. The uncertainty persists even as IT services stocks have recovered, raising questions about whether this rebound represents a lasting sector re-rating or merely a tactical bounce. As noted by Nomura Investment Forum speakers, geopolitical turmoil is not new - competition between major powers and the risk of conflict are inherent characteristics of international relations, with the current period representing a reversion to historical norms after the post-Soviet consensus era.
Adding to the sector's transformation, NVIDIA has agreed to acquire Hugging Face for approximately $12.9 billion, marking a critical strategic evolution from hardware-focused vendor to enterprise software platform. As reported by multiple sources, this deal represents a vital strategic shift, signaling NVIDIA's transition from primarily data-center hardware to broader AI ecosystem control. The acquisition captures the central hub of open-source AI models, potentially helping neutralize threats to the CUDA architecture and redefine NVIDIA's long-term terminal value. According to recent analysis, AI value creation is moving beyond foundation models toward platforms, distribution, enterprise integration and governance, creating new opportunities for investors positioned in the right sectors and markets.
Ezzat argues that AI deployment represents a fundamental transformation of companies that extends beyond simple technology changes. As reported by CNBC TV18, he emphasizes that deploying AI at scale requires companies to change their processes, organizational structures, skills, performance measures, culture, and in some cases, their business models. This transformation creates a large new pool of work for technology-services companies even as AI makes some existing work cheaper to deliver. Ezzat estimates the new AI-related market could be worth ₹3,20,000-3,60,000 crore ($400-500 billion) over the coming years. With performance diverging across regions and asset classes, investors are increasingly adopting a selective, market-specific approach when allocating capital.
Without the new AI opportunities, Ezzat believes the industry's growth would be broadly flat. However, with the transformation, he expects IT services to grow around 4-5% over the next three to four years, followed by faster growth thereafter. According to CNBC TV18, Capgemini's own business has strengthened significantly, with the company raising its full-year 2026 revenue growth forecast to 8.5%-9% from an earlier range of 6.5%-8.5%. Revenue reached €12.1 billion in the first half of the year, with constant-currency growth of 11.3%. CLSA maintains high conviction outperform ratings on Persistent Systems and LTIMindtree, with Persistent Systems targeting ₹6,246 (10.7% upside) and LTIMindtree at ₹5,534 (21.5% upside).
Capgemini is working to provide investors with clearer insights into its AI-related revenue streams. As reported by CNBC TV18, the company previously disclosed AI-related bookings but stopped reporting the figure because it lacked a sufficiently clear definition of what should count as AI work. Ezzat explained that this distinction becomes increasingly complex as AI gets embedded into ordinary technology projects, where a project may involve AI without being an entirely separate AI project. The company is now developing a more consistent definition and could begin disclosing AI-related numbers next year based on identified value pools driving its transition.
