AI partnership hype ahead of real gains for IT firms: ICICI report

An ICICI Securities report cautions that share price gains by IT firms post-AI partnership announcements may be premature. As these partnerships become common, investors will focus on execution, actual deployments, and revenue, not just tier status.

AI Partnership Gains May Be Premature, Warns Report

Share price gains by IT services companies following artificial intelligence (AI) partnership announcements may be ahead of the actual business benefits, as such partnerships become increasingly common, according to an ICICI Securities report.

In its report titled "AI partnership tiers become table stakes; execution is the real differentiator," the brokerage said investors would increasingly focus on actual AI deployments, revenue growth and profitability rather than partnership announcements alone.

"Given how attainable these thresholds are, such moves may run ahead of the economic value they signal," the report stated.

Execution Over Tier Status

ICICI Securities noted that shares of a mid-sized Indian IT services company rose by a high single-digit to low double-digit percentage in a single session after it announced mid-tier partnership status with a leading AI provider. However, the brokerage cautioned that partnership status does not necessarily translate into commercial success.

"Announcements backed by tangible commitments, such as dedicated business units, large-scale training programmes or co-funded investment, deserve more weight than tier status alone," the report said.

Top-Tier Status Becoming Commonplace

The brokerage highlighted that most large Indian IT companies could qualify for top-tier partnerships with AI providers such as OpenAI and Anthropic, as the requirements are relatively small compared with their workforce and client base.

For instance, Anthropic's Global Premier tier requires 1,000 certified practitioners and 100 customers using Claude in production across three regions. For large IT companies employing between 2.2 lakh and 6 lakh people, the certification requirement represents less than 0.5 per cent of their workforce. Similarly, 100 production deployments account for only 5-10 per cent of their active clients.

"Most large caps may reach the top tier with each major model provider within the next few promotion cycles," the report said. It added that once companies achieve these partnership levels, the status itself may no longer distinguish them from competitors.

"Once they do, tier status will likely stop setting firms apart; instead the depth of production deployments and the AI revenue they disclose would gain prominence," the report stated.

Early Financial Gains Emerge

The brokerage also pointed to early financial gains from AI adoption. Tata Consultancy Services (TCS) reported USD 3.1 billion in annualised AI revenue, with margins well above its company average. HCLTech said advanced AI contributed 32 basis points to its operating margin in the second quarter of FY27.

According to ICICI Securities, as AI partnerships become more widespread, the ability of IT companies to convert these alliances into actual deployments, revenue and improved profitability will become the key factor in determining their competitive position. (ANI)

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