AI is eating traditional IT services’ lunch.
Global IT spending still expands, albeit not evenly. Gartner, a global technology research firm, expects 2026 spending to reach roughly $6.1 trillion –$6.3 trillion (USD throughout), implying 10%–13% growth, with IT services rising to about $1.9 trillion at 8%–9%. AI-driven infrastructure and software continue to dominate incremental budgets, widening the gap between high-growth segments and traditional outsourcing vendors.
India’s IT services market remains structurally strong, forecast to grow ~9% CAGR to 2030, as per Mordor Intelligence, a market research and consulting firm. Outsourcing demand could expand above 13% p.a. through 2030. Still, as clients reduce the number of vendors they work with and push for lower pricing, larger firms with scale and broader capabilities are gaining share over mid-tier players.
The Mumbai-headquartered LTM’s latest move is not operational but symbolic. The company has rebranded itself, positioning around “Business Creativity” and AI-led outcomes. The shift signals urgency: differentiation in IT services is eroding as AI commoditizes delivery.
Deals remain the real scoreboard. The company has signed multiple large contracts, including a $580m media deal and a $450m agribusiness engagement. These wins suggest traction in AI-led transformation and large, integrated deal capture, but also reliance on a few big contracts.
The investment case hinges on execution coherence, not branding. Mid-tier IT firms win deals faster, but scaling margins and sustaining deal flow remains uneven. LTM risks sitting in the middle: not cheap enough to ignore, not dominant enough to command premium.
Over the medium term, the question is straightforward. Can LTM convert AI positioning into durable pricing power? If not, rebranding risks looking like a cosmetic fix in a tightening market.
The number game
Revenue for FY 26 held steady but underwhelmed. LTM delivered $4.7bn in revenue, up 6% y/y from $4.5bn in FY 25, with order inflow of $6.6bn. Still, the company’s growth is lesser than sector growth pointing to incomplete capture of the AI demand cycle.
Profitability improved more convincingly. Net profit reached $605.5m, up 16.9% y/y from $518.2m in FY 25, supported by operating discipline and deal mix. But this expansion leans more on cost control than pricing power, leaving limited cushion if deal intensity softens.
Segmentally, demand skewed toward AI-led transformation, cloud, and vendor consolidation. The pipeline tilted toward large, multi-year engagements as clients reduced vendor counts. Large deal wins improved backlog visibility. But concentration risk rose as growth depends on fewer, bigger contracts.
The core drivers remain AI industrialization and cost-takeout demand. But execution will decide outcomes. LTM shows deal momentum, yet converting backlog into sustained growth and margin expansion remains the real test over the cycle.
Growth reset
LTM trades at INR 4,171.4, down 15.6% over the past year and over 35% below its 52-week high of INR 6,429.5. The message is clear: the market has repriced growth expectations lower, questioning both demand visibility and execution consistency.
The stock sits on 20.8x forward P/E based on FY 27 earnings, well below its 3-year average of 28.2x. The stock is now valued significantly lower than its historical average. But this discount reflects skepticism, given lingering concerns around growth quality and margin durability.
With a INR 1.3tn ($13.6bn) market cap, LTM is priced like a mid-tier consolidator rather than a premium compounder. Out of the 32 analysts who follow the stock, 20 rate it Buy, with a INR 4,912 target price, implying 12.9% upside potential. Consensus still leans constructive, but conviction appears selective rather than broad.
Testing times
Execution risk is rising as deal sizes expand and client concentration deepens. A few delayed ramp-ups could disrupt growth visibility. Pricing pressure persists as AI standardizes services. And dependency on large deals increases earnings volatility if conversion or renewals weaken unexpectedly.
The company’s market caution looks earned. Growth still undershoots the opportunity, while margin gains rely more on discipline than true pricing power.
The company proved it can win in FY26. The next phase is tougher. A narrower set of large deals raises concentration risk, and AI commoditization keeps eroding differentiation. Execution—not positioning—will determine whether this momentum holds.
