AI is no longer just a buzzword for India’s IT sector. Companies are increasingly using acquisitions to build AI capabilities, with deals involving artificial intelligence (AI) and adjacent technologies accounting for around 70% of the sector’s total M&A deal value over the past two fiscals, according to an analysis by Crisil Ratings.

The total announced M&A deal value across the Indian IT sector stood at around ₹45,000 crore in FY2025 and FY2026. Of this, transactions involving an AI component accounted for approximately ₹35,000 crore.

Aditya Jhaver, Director, Crisil Ratings said, “When assessed from a deal-value perspective, transactions involving an AI component accounted for approximately 70% of the total M&A deal value during the last two fiscals, aggregating to ~ ₹35000 crore.”

Source: Crisil Ratings/Company reports

However, he added that the figure was significantly influenced by a large acquisition undertaken by a single company in FY2026.

The analysis of around 90 M&A transactions shows that AI has moved beyond being an experimental technology to becoming a key acquisition priority for Indian IT companies.

Based on the number of transactions, nearly half of the deals announced in FY2025 and FY2026 involved companies with AI and adjacent technology capabilities.

The shift comes at a time when AI is still a small part of revenue for most IT services companies, with many generating less than 10% of their revenue from AI-related work, as per Moshe Katri, Managing Director-FinTech & Tech-Enabled Services Investment Banking at Wedbush Securities.

At the same time, Indian IT companies are facing softer discretionary technology spending and pressure on traditional services growth, even as demand for AI-led transformation rises, making the shift increasingly timely.

US, Europe emerge as key hunting grounds

Earlier, acquisitions in the sector were largely focused on expanding digital capabilities such as cloud computing, process automation and analytics, as well as increasing geographical reach.

Over the past two fiscals, however, AI has emerged as the defining theme, alongside data engineering, digital engineering, engineering research and development (ER&D) and enterprise platforms.

“AI has become a strategic acquisition trigger for Indian IT companies,” said Jhaver. He said the focus was not merely on adding scale but on acquiring specialist talent, domain-ready platforms, marquee clients and stronger go-to-market capabilities.

Most of these acquisitions have been outbound, with more than 70% of the targets based in the US and Europe.

These markets offer larger pools of AI talent, proprietary platforms and sector-specific intellectual property, making them attractive for Indian IT companies seeking to build globally relevant capabilities, report said.

Crisil said most transactions have been funded through internal accruals, cash reserves or share swaps, with limited reliance on debt. This has allowed companies to pursue AI-led acquisitions without materially weakening their balance sheets so far.

Deal discipline keeps balance sheets in check

However, the impact of these acquisitions on credit profiles will depend on how effectively companies integrate the acquired businesses, retain talent, cross-sell capabilities and monetise their AI assets.

Joanne Gonsalves, Associate Director, Crisil Ratings, said deal discipline has so far helped prevent credit profile slippages, as most acquisitions have been modest relative to the acquirers’ net worth and funded largely without material debt.

He added, “While AI-led M&A should strengthen business positioning, we do
not expect it to materially impair credit profiles, provided companies integrate assets effectively and avoid stretching balance sheets in pursuit of transformative bets.”

AI M&A is creating a new pecking order

The shift in M&A priorities comes as AI begins to reshape the technology stack, enterprise data architecture, operating models and the economics of knowledge work.

IDC estimates that enterprise spending on AI platforms, applications and services could rise from around $400 billion in 2026 to nearly $1 trillion by 2029, implying a 36% CAGR.

For Indian IT services companies, this is also creating a new investment cycle, with acquisitions increasingly being used to build AI capabilities, rather than simply add scale.

Nasscom estimates that AI-related revenue generated by Indian technology-services companies could reach $10–12 billion in FY26, equivalent to around 3–4% of India’s IT services exports.

This makes the next phase of AI-led M&A less about the size of the acquisition and more about the capabilities being acquired. Companies with stronger AI talent, proprietary platforms, industry-specific solutions, data capabilities and the ability to integrate these assets could emerge as the bigger beneficiaries of the transition.

Also Read: AI could become growth driver for Indian IT in 6-12 months: Wedbush