Tech Services M&A Trends: Expanding The Story Through India's FY2025-26 Year-End Reports
Highlights:
Every company in this cohort has moved past AI experimentation into operating models and platform language.
Across the majority of the companies reviewed, margin expanded year on year. Several are improving profitability through structural changes to workforce and cost base, independently of what is happening at the top line.
The headcount picture is more varied than a simple reduction story. Workforces are being reshaped in composition and capability, with AI augmentation playing an increasing role alongside human delivery.
Attrition is stable or falling across those that disclosed it. The response combines people investment with AI-driven prediction models, though the figures should be read alongside significant workforce composition changes.
Earlier this year, we analysed the annual reports of ten of the biggest listed technology services companies to identify the patterns emerging across the sector and what they could mean for founders considering exit. Those companies included Accenture, Capgemini, Cognizant, IBM, EPAM, Globant, Sopra Steria, Reply, Publicis Groupe, and Stagwell.
At the time, we flagged that the Indian majors operate on March year-ends and would be covered separately. Their FY2025-26 reports are now published, and we’ve reviewed nine of them (TCS, Infosys, Wipro, Tech Mahindra, LTM (formerly LTIMindtree), Mphasis, Persistent Systems, Birlasoft and Zensar Technologies) to see what they add to the picture of how this sector is evolving, and what that could mean for founders considering their exit options.
The AI narrative is now universal
Every company in this cohort has moved past AI experimentation language into operating model and platform language. This is not confined to the largest players. Mphasis launched Tria, repositioning its entire commercial model around platform capability rather than headcount delivery. LTIMindtree rebranded to LTM as part of a deliberate shift away from technology services provider positioning. TCS describes building an AI operating system for enterprises as a strategic priority. Infosys has restructured its entire client offering around its Topaz AI platform.
The direction is consistent with what the December cohort showed about acquisition appetite surrounding AI, and it will surprise nobody who follows this market.
Margin is where the results are
Across the majority of the companies reviewed, margin expanded year on year and was reported as the primary financial achievement of the period. TCS reported an operating margin of 25%, up from 24.3% the prior year, described by the Chairman as the highest in four years. Tech Mahindra reported EBIT growth of 39.2% against revenue growth of 7.2% in reported terms and just 0.6% in constant currency, with management describing Q4 as the tenth consecutive quarter of EBIT improvement. Persistent Systems stated directly that "profitability outpaced revenue growth driven by continued operational efficiencies and disciplined cost management," reporting an EBIT margin of 15.6%, up from 14.7%. LTM reported an EBIT margin of 15.4%, up from 14.5%. Wipro expanded operating margin to 17.2%, describing the result as the product of operational discipline.
The drivers cited vary by company. TCS points to pyramid optimisation alongside utilisation improvement and cost discipline. Wipro attributes margin expansion in part to a reduction in average headcount and per-employee cost during the year, alongside the benefit of its HARMAN acquisition strengthening its engineering portfolio. Tech Mahindra lists pyramid optimisation as an operational lever alongside digital, automation and utilisation improvement.
Revenue growth across the cohort is modest. TCS grew revenue 4.6% in reported terms but contracted 2.4% in constant currency. Tech Mahindra grew 7.2% in reported terms and 0.6% in constant currency. Wipro contracted 1.6% in constant currency. Across the majority of the cohort, margin improvement is reported as the headline achievement at a time when real revenue growth is modest. Several of these businesses are improving profitability through structural changes to their workforce and cost base, independently of what is happening at the top line.
The workforce is being reshaped, not simply reduced
The headcount picture across this cohort is more varied and more interesting than a simple reduction story. TCS is the clearest example of headcount falling while revenue and margin rose, reducing its workforce from 607,979 to 584,519, a decline of 23,460 or 3.9%, over a year in which revenue grew 4.6%. That is the RPH thesis - more revenue from fewer people - showing up in audited results at the largest company in the cohort.
Elsewhere, the picture is different but points in a consistent direction. LTM grew its permanent workforce from 84,307 to 87,950, and simultaneously welcomed over 6,700 freshers during the year, a 40% increase on FY25, alongside deploying more than 1,500 AI agents to augment its teams. Wipro's headcount grew from 233,346 to 242,156, partly reflecting the addition of engineering talent through its HARMAN acquisition, while the company's own commentary notes a reduction in average headcount and per-employee cost during the year from cost optimisation initiatives.
Mphasis articulates where this is heading most directly. A client case study in its annual report describes payment volumes growing 110% with no additional headcount cost, stating that "AI agents and opti-shoring decouple volume from headcount entirely." Its three-year strategic plan states that "the unit of value delivery shifts from headcount to platform capability combined with domain expertise. Volume growth is absorbed by the platform, not by hiring." That is a company describing its intended operating model, not a reported financial outcome across the cohort. But the direction it points to is consistent with what TCS and LTM are each demonstrating in their own way.
The underlying thesis we explored in our earlier piece on revenue per head is relevant here. A business generating more revenue from the same or fewer people, or restructuring its workforce so that each person generates more value, is moving in the direction the largest players in this sector are actively pursuing. A mid-market business considering exit should be asking whether it can demonstrate the same direction of travel.
Attrition is falling as teams are restructured
As these businesses change the composition of their workforces, retaining the right people has become more consequential. TCS identifies the tension in its risk framework: its strategic transition towards becoming an AI-first enterprise is "fundamentally dependent on building a globally scalable and future-ready workforce enhanced by AI capabilities," but "intensifying global competition for specialised AI talent may increase attrition levels, creating challenges in retaining critical expertise required to drive transformation initiatives." Reshaping the workforce creates a retention risk at the same time as it creates a margin opportunity.
The figures across those that disclosed them show attrition stable or falling. Zensar at an industry-leading 9.8%, Tech Mahindra at 12.1%, LTM at 13.3% down from 14.4% the prior year, TCS at 13.7%.
The response across the cohort combines people investment with data-driven management. TCS has undertaken a reskilling and restructuring programme supported by reward and recognition and career development initiatives. Tech Mahindra attributes lower attrition to employee engagement initiatives, reporting "consistent lower attrition and stronger engagement outcomes than peer companies." Alongside this, LTM launched a Top Talent Attrition Prediction model in 2025 with approximately 80% accuracy, describing the result as "a shift from reactive HR to proactive, insight-led decision-making," and Tech Mahindra operates its own equivalent model.
These figures should be read with the workforce composition changes in mind. LTM's significant fresher intake will naturally affect its attrition rate as a percentage of total headcount. The direction nonetheless is consistent with businesses investing in retention at a point when the cost of losing the right people is rising.
What the Indian majors add to the picture
The nine reports reviewed here describe a sector restructuring how it delivers value. Margin is expanding. Workforces are being reshaped in composition and cost. The businesses moving furthest and fastest are those with the scale to absorb the investment required. The direction of travel is consistent across the cohort even where the mechanisms differ.
The founders who will be best positioned in this market are those who can demonstrate they are already moving in the same direction, and who understand how to articulate that story to the people they are selling to.
If you want to understand where your business sits in that picture, we would be glad to have that conversation. Schedule a consultation here.
