Persistent's $1.4B Nagarro deal and Coforge's $2.35B Encora purchase show how mid-tier IT firms are betting big on AI. Integration risks and pricing model shifts loom for the sector.
Persistent Systems' $1.4 billion acquisition of Nagarro is the latest in a string of Indian IT deals driven by AI. The company offered a 140% premium and took a €1.4 billion loan from Barclays to fund it. The leverage raises questions about how these acquisitions will pay off.
The strategy splits into two camps. Large caps like TCS and Infosys buy small. TCS paid $700 million for Coastal Cloud. Infosys spent $480 million on In-Tech. These deals fill specific gaps in AI and cloud computing. Mid-tier firms like Coforge and Persistent go bigger. Coforge bought Encora for $2.35 billion. Persistent's Nagarro deal is its largest ever.
Global technology M&A is also being driven by AI. In the first five months of 2026, technology, media and telecommunications deal values rose 48% year-on-year to $472 billion. Transactions above $5 billion accounted for nearly half the value. Much of this activity focuses on securing access to the AI stack. That includes foundation models, data, compute, power, and cloud infrastructure. Because these assets are too expensive to acquire outright, companies increasingly rely on minority investments, partnerships and long-term commercial agreements instead of full buyouts.
Indian IT acquisitions are far smaller. They follow the traditional model of buying technology capabilities and engineering talent. The top 10 Indian IT companies spent a combined $4.5 billion on acquisitions in the first half of 2026.
The common thread is AI. Routine coding and testing work is being automated. Clients want fewer billable hours and lower prices. Jefferies estimates AI could cut industry revenue growth by three percentage points over five years. In a worst-case scenario, growth flattens after 2031. Operating margins are narrowing as productivity gains are shared with customers.
Acquisitions bring in AI talent and platforms that would take years to build internally. Coforge added 3,100 engineers in Latin America through Encora. Wipro's $375 million purchase of Harman Digital Transformation Solutions brought 5,600 employees in embedded software. Yet the headcount math is shifting. TCS has cut its workforce from 615,000 to 585,000 since 2023. Wipro went from 257,000 to 240,000. The industry is moving from mass hiring to specialised teams in AI and cloud engineering.
The risks are real. Persistent's shares fell after the Nagarro announcement. Nagarro's 13.8% adjusted Ebitda margin is lower than Persistent's 15.6% Ebit margin. Integration costs could squeeze profits. The bigger question is whether acquisitions solve the pricing problem.
For investors tracking Indian IT, the divergence between large caps and mid-tiers matters. Infosys (Alpha Score 57) and Wipro (Alpha Score 46) have different risk profiles. Barclays, which provided the loan for Persistent's deal, carries an Alpha Score of 59. The Nifty IT index has fallen sharply in 2026. The next catalyst is whether these acquisitions actually boost margins and revenue growth, or just add debt. For a broader view of the sector, see our stock market analysis.
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