India's Top IT Firms Split on Salary Hikes Amid AI Race

The differing approaches to employee pay by Tata Consultancy Services (TCS), Wipro, and Infosys are key signs of their business confidence and strategy for the AI-driven tech shift. While TCS and Wipro are increasing salaries, signaling a proactive move to keep talent, Infosys's deliberation points to a more careful look at market demand and costs.

Salary Hike Divide: TCS & Wipro Act, Infosys Pauses

On April 1, TCS implemented its annual increments, offering double-digit raises to top performers to secure key skills. Wipro followed with increases effective March 1, though it acknowledged potential pressure on profits in the immediate quarter. This proactive compensation strategy suggests confidence in future demand and a commitment to strengthening workforce capabilities, especially in high-demand areas like AI and cloud services. Infosys, however, remains undecided on the timing and amount of its hikes, with CEO Salil Parekh stating no decision has been made. This cautious posture could reflect a more conservative outlook on client spending or a need to control costs before raising payroll, especially as the sector deals with how AI could change traditional services.

AI Talent Race Fuels Demand

India's IT sector is bracing for significant growth, projected at 12-15% in 2026, creating approximately 1.25 lakh new roles. The demand for AI, ML, data, and cybersecurity professionals has surged, with hiring in these areas up 40-50% year-on-year in early 2026, and MNCs boosting their hiring by 82%. Senior roles paying over ₹20 lakh have grown by 55%, indicating a fierce competition for experienced talent. In this environment, TCS's decision to offer double-digit hikes to top performers and Wipro's rollout of increases are moves to preempt staff loss and secure specialized skills. TCS's AI services revenue surpassed $2.3 billion in Q4 FY26.

Financials and Deals

As of April 24, 2026, Infosys's stock traded around ₹1,155 with a P/E ratio of approximately 16.7. Wipro's P/E was around 15.8, and TCS hovered near 17.65. Despite similar stock valuations, their differing compensation strategies create a clear split. Wipro's shares saw a slight uptick on April 15 following news of an acquisition of Alpha Net customer contracts for up to $70.8 million, aimed at bolstering AI-powered application services. Conversely, IT majors' shares, including TCS and Infosys, experienced declines following mixed results and cautious outlooks.

Scrutiny on Infosys's Strategy

Infosys's hesitation could be interpreted through several lenses. While it met Q4 EPS estimates, the company's overall revenue growth has faced questions, and its ADRs slumped following the results. The broader IT sector is also experiencing AI-driven pressures on traditional services, leading some analysts to issue cautious ratings and price target cuts for Infosys. Competitors like HCLTech and Tech Mahindra hold higher P/E ratios (around 20.4x and 26.5x, respectively), suggesting different market valuations for their growth prospects and strategies.

Risks Across the Sector

Infosys's measured approach to salary increases, while prudent from a cost-control perspective, risks losing key talent in a competitive market. A widening talent gap of 44% in 2025 has already driven median salaries up by 18%, making proactive retention critical. Failing to match competitor compensation could lead to increased staff turnover, particularly among sought-after AI and cloud specialists, thereby hindering its ability to capitalize on the evolving tech demands. Furthermore, Wipro, despite its salary increases, faces profit pressures from recent acquisitions and wage adjustments, and its Q4 FY26 profit declined 1.89% year-on-year. Morningstar downgraded Wipro's economic moat rating to 'none' due to generative AI's potential threat to work hours in software and business services – a risk that could equally impact Infosys if its cost-efficiency strategy falters. TCS, while reporting profit growth, saw its headcount decrease year-on-year, though it added employees sequentially, indicating a continuous rebalancing of its workforce.

Outlook for Key IT Firms

Management at TCS anticipates FY26 to be better than FY25, supported by a robust order book and deal pipeline, with margins guided between 26-28%. Wipro's outlook, however, is mixed. While it reported sequential profit growth and a significant buyback program of up to ₹1,500 crore, its Q4 FY26 revenue saw a sequential increase of only 2.88% with a year-on-year profit dip. Analyst consensus for Wipro remains cautious, with a 'Reduce' rating from several firms and a recent downgrade to 'underweight' by Morgan Stanley. Infosys, having met its Q4 EPS estimates, faces continued analyst scrutiny regarding its future growth trajectory and the impact of its cost-management strategy on talent retention amid intense sector competition.