A report by Kotak Institutional Equities suggests that advanced AI systems like Anthropic Mythos could disrupt the growth trajectory of India’s IT services industry.
The report highlights that this model “exhibits a step-jump in benchmark performance across software engineering tasks,” indicating a significant leap in coding-related capabilities.
AI Disruption Ahead: Mythos Model Signals Major Shift for India’s IT Services Sector
As a result, it warns that such advancements “raise near- to medium-term disruption risks for IT services,” particularly for firms heavily dependent on application services.
Furthermore, improvements in AI-assisted coding are expected to move beyond theory and begin affecting real-world business outcomes.
The report explains that these developments could turn an earlier estimate of a 3–3.5% annual growth slowdown from a cautious projection into a more realistic scenario.
It also notes that if AI capabilities continue to evolve rapidly, the downside risks for the sector could increase further.
At the same time, the report acknowledges that the model could “increase efficiencies across all IT services segments,” suggesting broad operational improvements.
However, these efficiency gains are unlikely to be evenly shared, as automation in coding may create uneven productivity benefits across different segments.
In particular, application development services are expected to face a greater impact compared to other areas of IT services.
AI Advancements May Trigger Valuation Pressure and Pricing Challenges in IT Services
The report also raises concerns about financial implications, noting that such technological shifts “could pressurize the valuation multiples of IT services companies.”
Additionally, it warns that these changes may intensify “near-term deflation risks for services,” affecting pricing and revenue structures.
Despite these challenges, the report points to new opportunities emerging from AI adoption within the sector.
For instance, it anticipates faster growth in areas like upgrading legacy systems and strengthening data infrastructure.
These developments are expected to partly balance out the negative effects of revenue deflation.
Moreover, once such AI models are widely implemented, they could “accelerate GenAI-driven business use cases,” opening up significant new opportunities for Indian IT firms.
The report concludes that AI-led transformation could fundamentally reshape the industry’s future, reiterating that “we expect Mythos to increase efficiencies across all IT services segments.”
