Indian IT AI Acquisition Wave Faces Market Skepticism: Dewan Sees Recovery Only When Deals Show Earnings Impact

The Quick Take

• Markets remain skeptical about Indian IT's AI acquisition wave, with concerns that companies acted too late and are paying premium valuations for assets at a time when their own stocks are under pressure.
• Market expert Neeraj Dewan noted that sentiment will improve only when acquisitions contribute measurably to earnings, cash flows, and business performance.
• Strong execution on integration and demonstrated AI revenue contribution are the benchmarks that will determine whether AI acquisitions create lasting shareholder value.

Indian IT companies including Persistent Systems, Wipro, and HCL Technologies have aggressively accelerated AI-focused acquisitions to strengthen long-term competitiveness as artificial intelligence disrupts traditional enterprise application services models. Business Today's market expert commentary from Neeraj Dewan reflects the investor consensus: the acquisitions are strategically necessary and intellectually sound, but markets question whether the timing and valuations reflect urgency rather than discipline. The concern that many firms held significant cash reserves but delayed AI capability investments until the market downturn — and are now paying premiums in a sector where valuations have already corrected — introduces questions about capital allocation judgment.

Dewan's framework for sentiment improvement is clear and demanding: acquisitions must contribute to earnings, cash flows, and business performance before market skepticism lifts. This is a high bar in the context of large IT services acquisitions, which typically require 12-24 months of integration before financial contribution is visible in reported results. The parallel between Persistent's Nagarro deal and earlier large Indian IT acquisitions suggests investors are drawing comparisons to transactions that delivered initially dilutive results before eventually creating value. The market is unwilling to pay a premium for optionality in a sector already trading at YTD multi-year lows; it wants demonstrated results before re-rating.

The sector-level forward signal is whether any of the AI acquisitions by Indian IT companies begins showing quantifiable revenue contribution within 2 quarters of deal closure. If one major Indian IT acquirer demonstrates rapid post-acquisition growth acceleration, sentiment could shift positively across the sector. Watch Persistent Systems as the most recent large acquirer and the most watched case study for the AI acquisition thesis validation or invalidation. The macro variable is global AI services demand: if enterprise customers begin allocating budget to AI transformation projects at scale in H2 2026, the Indian IT sector's AI acquisition investments would rapidly justify themselves through revenue growth.

Synthesized from 1 source.