What Midcap IT companies Are Really Telling Investors?

Last week, we looked at the results of the large-cap IT companies. While companies like TCS, Infosys and HCLTech showed that AI is becoming a part of enterprise spending, this week, the midcap IT companies gave us a much clearer picture.

One thing stood out across Mphasis, Persistent Systems and Coforge.

The conversation has shifted from “Impact of AI?” to “How can AI generate business outcomes?” And that’s an important change. Let’s start with Mphasis’s results.

Mphasis: AI Is Moving From Pilots To Production:

At first glance, the numbers were decent.

-Revenue came in at $471 million, growing 2.1% QoQ and 8.3% YoY in constant currency.
-The company maintained its FY27 guidance.
-Net new deal wins (TCV) stood at $461 million, marking the 5th consecutive quarter above $400 million.

But the management commentary was far more interesting than the numbers.

They said Q2 could deliver the best sequential growth they’ve seen in the last three years. Why?

Because they are entering the quarter with their highest-ever pipeline and the strongest short-cycle deal activity in several quarters. Investments made over the last year, including Tria, platform capabilities, and acquisitions, are now beginning to convert into actual revenue.

AI Is No Longer A Separate Business:

Probably the biggest takeaway from Mphasis was this. A year ago, only around 12% of its pipeline involved AI. Today, 70% of the pipeline includes AI.

Interestingly, management said they no longer treat AI as a separate category because it is becoming part of almost every enterprise deal.

That tells us something important.

Companies are no longer buying AI as an experiment. They’re buying it as part of their core technology spending.

Management made an interesting observation. Twelve months ago, most discussions were about choosing the best AI model. Today, customers care far less about the model itself. Instead, they’re asking:

-Will this improve productivity?
-Can it generate measurable ROI?
-Can it be governed safely?

Even LLMs Are Becoming Commodities:

Another interesting trend was around Large Language Models. Management believes enterprises don’t want to depend on a single frontier model.

Instead, they want the flexibility to switch between models whenever needed. They also expect token costs to keep falling, making the underlying models less important over time.

The real differentiation, according to them, won’t be which LLM you use, but how effectively you apply AI inside an enterprise.

This is exactly what we observed in the large-cap IT earnings as well. Clients are increasingly using different LLMs for different workloads, depending on cost, speed, and complexity.

Persistent Systems: Bigger Deals And Bigger Ambitions:

Persistent also delivered another strong quarter. The biggest announcement was a long-term strategic agreement with an existing US-based global technology leader. Although the customer name wasn’t disclosed due to confidentiality agreements, the size certainly grabbed attention.

-Annual revenue opportunity of over $125 million
-Total contract value of more than $650 million
-Contract duration of 6.5 years

Management said the deal will start contributing to both revenue and margins from Q2 onwards. That’s a significant positive because very large deals don’t always improve profitability immediately.

Expansion, Not Consolidation:

Persistent also spoke about its acquisition strategy.

Management made it clear that future acquisitions are not about getting bigger for the sake of it. Instead, the goal is expanding their presence in Europe, where they currently have relatively lower exposure.

Today, over 81% of Persistent’s revenue comes from North America, while Europe contributes just around 8–9%.

Acquisitions can help diversify this revenue mix while also strengthening nearshore delivery capabilities.

Recent acquisition: Nagarro. Why Nagarro Fits?

Management believes Nagarro brings a highly complementary customer base.

Customer overlap is less than 10 clients, meaning Persistent gets access to a large new set of enterprise customers rather than competing for the same accounts.

They also believe stronger execution can revive growth across the combined business over the coming years.

Coforge: Scaling AI Faster Than Expected:

Among the three companies, Coforge perhaps sounded the most aggressive. The company isn’t positioning itself as an AI model developer.

Instead, it wants to become the company that helps enterprises actually operationalize AI. That’s a very different business.

Instead of simply deploying AI, they’re helping clients govern it, integrate it into workflows, and generate measurable business outcomes.

Encora Integration Is Already Paying Off:

The Encora acquisition appears to be progressing faster than expected.

Even though the acquisition was completed only recently, EBIT margins already reached 16%, ahead of management’s full-year guidance.

The improvement came largely from faster-than-expected cost synergies and tighter operational control.

Order Book Continues To Strengthen:

Another positive was deal momentum.

-Organic order intake reached $691 million
-Executable order book for the next 12 months stood at $2.23 billion, up 44% YoY

Management also sounded very optimistic about Q2. They expect to sign large deals in numbers that would have matched an entire year’s performance just two or three years ago.

That gives investors confidence that demand remains healthy.

From Scale Of People To Scale Of Intelligence:

One line from management stood out. The industry is moving from a scale-of-people business to a scale-of-intelligence business.

Traditionally, IT companies grew by hiring more engineers. Going forward, growth will increasingly come from delivering better outcomes through AI, rather than simply deploying more people.That’s a structural shift for the industry.

Our Takeaway:

Despite having different customer bases and business models, all three companies highlighted very similar trends.

• AI is now part of almost every enterprise conversation.

• Clients are demanding measurable business outcomes rather than AI experiments.

• Large AI-led transformation deals are becoming more frequent.

• Acquisitions are helping companies strengthen AI capabilities faster.

• The focus is shifting from manpower to productivity.

Perhaps the biggest takeaway is that AI is no longer viewed as a threat to Indian IT companies.

Just a few quarters ago, investors worried that AI would reduce demand for traditional IT services.

Today, these same companies are showing that AI is becoming one of their biggest growth opportunities.

We’re also seeing acquisitions play a key role, with companies buying capabilities instead of building everything from scratch.

That’s becoming a common strategy across the midcap IT space. Of course, this is still early.

The real test will be whether these strong pipelines translate into consistent revenue over the next few quarters.

But for now, one thing is becoming increasingly clear. The AI spending cycle has begun. The next phase is execution, and that’s where these midcap IT companies will either stand out or fall behind.