Slowdown in IT sector not just due to AI, Trump tariffs: Sridhar Vembu

New Delhi: The slowdown seen in the quarterly results by India’s information technology (IT) companies is not just a result of disruption due to artificial intelligence (AI) and Donald Trump’s reciprocal tariffs but also inefficiency in products and services of the broader software industry, Zoho founder Sridhar Vembu said on Friday.

In a post on X social media platform, Vembu said: “My operating thesis: what we are seeing is not just a cyclical downturn and it is not just AI related. Even without the uncertainty induced by tariffs, there was trouble ahead. The broader software industry has been quite inefficient, both in products and services”.

He further stated that these inefficiencies have accumulated over decades of a prolonged asset bubble.

“Sadly, we adapted to a lot of those inefficiencies in India. Our jobs came to depend on them. The IT industry sucked in talent that may have gone into manufacturing or infrastructure (for example),” said Vembu.

“We are only in the early stages of a long reckoning. My thesis is that the last 30 years are not a good guide post to the next 30 years. We are truly at an inflection point,” he added.

According to him, “We have to challenge our assumptions and do fresh thinking”.

Indian IT majors Tata Consultancy Services Ltd., Infosys and Wipro reported their fourth quarter and full year financial results this week and gave a weak outlook, sparking disappointment on the street.

The IT companies have been under the tariff cloud, which has delayed new orders and project ramp-ups.

Infosys, one of India’s top IT companies, reported a 11.7 per cent year-on-year (YoY) drop in its consolidated net profit for the fourth quarter of the financial year 2024-25 (Q4 FY25) to Rs 7,033 crore, compared to Rs 7,969 crore in the same quarter last year.

However, Infosys’ revenue rose by nearly 8 per cent YoY to Rs 40,925 crore as compared to Rs 37,923 crore in a year-ago period.

The company reported an operating margin of 21 per cent, slightly lower than the 21.3 percent margin in the previous quarter but up from 20.1 percent in the same quarter a year ago.

—IANS