Opportunity is bigger than before, says Infosys chairman Nilekani on disruption posed by GenAI tools

BENGALURU: Infosys Ltd chairman Nandan Nilekani sought to reassure investors that the rise of generative AI (GenAI) is expanding business opportunities for the company, even as anxiety triggered by the launch of new AI tools has weighed on the stock, sending shares of the India's second-largest information technology (IT) services firm down 14% between 1 January and 17 February.

“My view is that there is no opportunity gap. Opportunity is bigger than before,” Nilekani told analysts in his brief 20-minute talk on Tech transitions – Why is the AI transition different? as part of Infosys’s first analyst day event on Tuesday.

“It is not an opportunity risk but an execution risk,” said Nilekani, calling the current phase “tumultuous times”.

Nilekani argued that a lag between rapid technological change and adoption by large Fortune 500 companies creates what he described as “deployment gap”, allowing firms such as Infosys to help large banks, retailers, and companies across industries implement AI-led tools.

“Fundamentally, this is root and branch surgery, the way business is done,” Nilekani said, describing how AI disruption is making companies re-examine the way they do business.

“Modernizing of legacy systems cannot be deferred anymore. That is over,” said Nilekani, who, along with his six friends, co-founded Infosys in 1981, and also reiterated new areas where the IT services company could benefit.

In a positive signal for investors, Infosys disclosed for the first time that its AI-related revenue was $280.4 million, accounting for about 5.5% of its $5.1 billion revenue in the October–December quarter (Q3FY26).

On 17 December, Infosys’s larger rival, Tata Consultancy Services Ltd, said its annualized revenue from AI-related business totalled $1.5 billion at the end of the September quarter (Q2).

Besides Nilekani and chief executive Salil Parekh, a dozen senior leaders from the company briefed analysts on how Infosys is navigating a period that has polarized views on the future of the IT services industry, between naysayers predicting disruption and optimists expecting growth.

Earlier this month, tech stocks, including shares of homegrown IT firms, fell between 5% and 8% after AI company Anthropic launched productivity tools for its Claude Cowork platform that can automate legal work and other functions inside large businesses, raising concerns that such tools could eat into the revenue of the $283 billion Indian IT industry.

“For the typical IT services the near to medium term still isn’t disrupted. Even if the projects themselves may plateau relatively, the productivity gains will drive margins - as the negotiations with vendors will lag in terms of AI linked discounting compared to the gains actually realised,” Bernstein analysts Venugopal Garre and Nikhil Arela wrote in a note, AI vs Human: Code Red and the Programmers' Endgame, dated 16 February.

“The longer run case is unpredictable and hazy, though it likely points at IT services becoming low margin commoditized industry. But that’s quite far off as well as dependent on several factors including AI’s continued refinements,” the note said.

“The current market reactions perfectly capture two fallacies - the slippery slope and the bandwagon, and once the dust of the AI storm settles, we perceive a correction to emerge. Till then, statements like replacement of all white collar jobs will emerge and work wonders for valuations of AI centric companies,” it added.

Earlier this week, Microsoft AI chief executive Mustafa Suleyman warned that AI tools could replace most white-collar work in the next 12 to 18 months.