AI hardware spend hits Indian IT as IBM warning sinks Infosys, Wipro ADRs
American depository receipts of Infosys and Wipro sold off sharply after IBM cut its quarterly revenue guidance, signaling that enterprise budgets are shifting away from traditional software services toward artificial intelligence infrastructure.
Infosys ADRs tumbled 7% while Wipro dropped 3% after IBM forecast second-quarter revenue of $17.2 billion, missing the $17.86 billion consensus estimate from analysts at LSEG. IBM also projected adjusted earnings per share of $2.93, falling short of the Street estimate of $3.02. IBM shares fell sharply in premarket trading, dragging the broader software and IT sector lower.
The shortfall was driven by a late-quarter pivot in customer spending. IBM chief executive Arvind Krishna told investors that "the company did not adapt quickly enough to changing market conditions, which led to several large deals not closing as expected." Clients redirected quarterly capital spending toward data-center infrastructure to secure supply-constrained equipment ahead of anticipated price hikes.
This sudden reallocation of technology budgets poses a direct threat to India’s IT services sector. Companies like Infosys and Wipro rely heavily on discretionary tech spending from global clients, particularly in the United States. When enterprises prioritize buying servers, storage, and memory for artificial intelligence over outsourcing traditional software development, revenue growth expectations for Indian IT exporters immediately suffer.
The IBM update validates a negative narrative that has pressured Indian IT equities throughout the year. The sector has already been grappling with sluggish discretionary demand, protracted deal conversion timelines, and structural concerns that AI-led automation will erode traditional billing volumes. This new dynamic adds a distinct, near-term layer of risk: AI adoption may actually delay spending on software and services projects because capital is being diverted to physical hardware and data-centre capacity.
For market participants, the immediate focus now shifts to how Indian outsourcers navigate this sudden budget squeeze. Infosys, with its significant US exposure and consulting-led business model, is highly sensitive to fluctuations in enterprise technology budgets. Investors will be parsing the company's upcoming deal wins, large contract ramp-ups, margins, and management commentary to determine if IBM's hardware-driven miss is an isolated event or the beginning of a prolonged sector-wide headwind.
