The Indian IT sector is navigating a volatile phase in February 2026, characterized by a sharp divergence between stock market valuations and operational progress in Artificial Intelligence. The Nifty IT index recently witnessed a significant sell-off, plunging nearly 8% in a single week and approximately 15% over the last month. This correction was triggered by intensified fears of AI-driven disruption to traditional service models, coupled with weak global cues and a cautious outlook on discretionary spending. Despite the market turbulence, top-tier giants are reporting a structural pivot toward AI-native services. The December-quarter results for the 2025-26 fiscal year reveal that AI work is moving rapidly from experimental pilots to production-scale contracts. Total deal signings across the sector have surged, with major firms reporting single-quarter bookings ranging from $3 billion to over $9 billion. Advanced AI now contributes roughly 4% to 6% of total revenue for leaders like TCS and HCLTech, with AI-related revenues growing at a quarter-on-quarter rate of nearly 20%. Tata Consultancy Services has reported an annualized AI revenue run-rate of $1.8 billion, marking a significant milestone in monetizing the technology. Similarly, Infosys is currently engaged in over 4,600 active AI projects and has deployed more than 500 AI agents across its client base. These companies are shifting from "effort-based" billing to "outcome-led" models, embedding AI into large-scale cloud modernization and data engineering contracts to defend their market share. Profitability remains a key focus as firms manage the high costs of AI infrastructure and internal upskilling. While operating margins are under pressure due to wage inflation and investment requirements, they have largely stabilized between 21% and 22%. The hiring landscape has also transformed; the industry is moving away from mass recruitment toward specialized talent. While large-cap firms reported a net employee addition of 8,000 to 11,000 in recent periods, the focus has shifted heavily to Global Capability Centers, which are expected to employ up to 4 million professionals by 2030. The broader outlook for 2026 remains cautiously optimistic. India’s IT industry revenue is projected to reach $350 billion this year, contributing nearly 10% to the national GDP. While secondary market volatility persists, analysts suggest that the current sell-off has brought valuations to a "deep value" zone. The sector is now positioned as an essential orchestrator for global enterprises, helping them navigate the complex transition from legacy systems to AI-integrated platforms. [IT Sector Analysis](https://www.youtube.com/watch?v=yzQ_5pcVxsw) This video provides a detailed breakdown of the recent quarterly earnings and the specific impact of AI on the revenue growth of India's largest IT firms. http://googleusercontent.com/youtube_content/0