A growing portfolio of Generative AI projects, clients’ priorities for cost optimisation services and above-average growth from emerging markets have led to an expansion in the number of smaller clients (ranging from $1 million to $20 million) for Indian IT majors, while larger deal size projects have stagnated.

The $100 million clients bucket, which climbed gradually from FY21 to FY24, has remained flat in three out of the four top-tier IT services companies in the first half of FY25. However, the count of clients in the smaller bucket is ramping up.

Tata Consultancy Services (TCS), the biggest player in the segment, added five new clients year-on-year (y-o-y) in the $100 million+ band in the September quarter, bringing the total to 66. But in the $10 million+ band, the company added eight clients, bringing the total to 491.

In the October earnings call, TCS CEO K Krithivasan said that clients are continuing to focus on cost optimisation deals, which tend to be smaller than large scale IT-transformation projects. He also said that Generative AI-related engagements went up from 270 in Q1 to 600 in Q2. Analysts note that AI-related deals are typically smaller in contract value and shorter in tenure at this stage.

Sumit Pokharna, VP-Fundamental Research, Kotak Securities, noted that a weak demand environment and low IT spends by clients have resulted in marginal growth in client addition in the higher buckets. ”The number of Generative AI engagements going to production is steadily increasing, but still, most of these are short-term in nature. Lack of viable use cases and difficulty in scaling restrict speed of adoption,” he added.

For Infosys, the number of clients in the $100 million+ segment stands at 41 as of September 2024 and it has remained at this level since FY23. In the same period, the number of $1 million clients grew from 922 in FY23 to 985 as of September 2024 quarter. Infosys CFO Jayesh Sanghrajka said in the call that their smaller deals — less than $50 million in size — have to grown double-digits in Q2FY25.

Similarly, HCL Tech has seen an increase in the number of $5 million clients from 395 in FY24 to 402 in Q2FY25 but the number of clients making up its $100 million bucket has remained flat at 22 in the last three quarters.

Gaurav Vasu, Founder and CEO of research firm UnearthInsight said that the uptick in deals and new clients in APAC, Japan, Australia, New Zealand and India have outpaced growth from Western markets and these generally tend to be smaller experimental deals. “Similarly, the Gen AI deals are generally proof-of-concept projects, which are lesser than $10 million,” he added.

As per UnearthInsight’s own analysis, the share of large digital transformation deals in total contract value (TCV) has dipped from 40 per cent in FY22 to 35 per cent as of H1FY25. At the same time, share of the cost optimisation deals have gone up from 30 per cent to 40 per cent of TCV.