LTM is Over AI Pricing Reset. It's More Worried About AI Deployment

For over a year, IT services companies have been navigating an AI pricing reset. Large enterprise customers are using the emergence of generative AI tools to compress deal sizes as human-heavy coding takes a backseat. Companies are pivoting from hourly billing to outcome-based contracts and bundled AI subscriptions.

This has weighed on India's IT services industry for more than previously thought. LTM (formerly LTIMindtree), in its first-quarter earnings call, said the productivity-linked pricing reset with its largest customers is now behind it. 

"The productivity-linked pricing conversation we have had with some of our large clients is now behind us," Venu Lambu, CEO and MD of LTM, told analysts in the post-earnings call. "That transition is complete, and we see this as a source of strength going forward, rather than a headwind, as it has strengthened our strategic positioning with these accounts.”

However, he acknowledged that enterprise AI adoption is still running well behind the industry hype cycle.

That shows up in its order book. In Q1 FY27, the company boasted an order book of $1.7 billion featuring two large deals—similar to the previous quarter. 

Responding to a question on what portion of LTM’s overall portfolio had been affected by AI deflation, Lambu noted, "I've been consistent in my earnings that the productivity headwinds in top accounts in top segments is what is material. What happens in the smaller accounts and smaller engagements is really not material because you anyway have so much work to do in those accounts."

LTM considers Q1 as a turning point in its AI journey. It unveiled plans to build a 1,000-strong pool of forward-deployed AI engineers. Its AI revenue across creative, industrial, and business AI contributed approximately $150 million on a quarterly run rate basis.

"Our AI pivot is now producing tangible proof points for clients, visible in the outcomes we are creating, and in the size and nature of the engagements we are winning," Lambu said in a statement accompanying the results.

Otherwise, the Q1 results reflected a steady-state of affairs.

In the quarter ended June, LTM reported a 6.4% year-on-year revenue growth in constant currency to $1,223.5 million, with EBIT margin expanding 120 basis points year-on-year to 15.5%. However, on a sequential basis, revenue grew just 0.3% in constant currency, marking its weakest quarterly growth in four quarters.

Net profit rose 17.1% year-on-year to Rs 1,468.6 crore.

Now LTM's focus is on capturing the early opportunities emerging from the AI era, even as AI adoption has yet to accelerate meaningfully. 

Forward Deployment

The company announced a list of launches for its BlueVerse ecosystem, its enterprise-grade AI-native ecosystem that helps clients build agent-driven solutions, including accelerating enterprise-wide adoption of Claude, Claude Code, and Claude Cowork. , 

Beyond that, the company also disclosed a programme called "AI 1000" to build a dedicated pool of 1,000 forward-deployed engineers (FDEs) and accelerate the development and client deployment of small language models (SLMs) across LTM's key verticals.

This follows TCS making a similar announcement last week, planning a new FDE-style operating model with at least 1% of the employee base.

Indian IT is now rushing to catch up to AI giants that threaten to upend its traditional systems integrator function by embedding their own specialised engineers into client offices for an AI-native transformation. OpenAI created the OpenAI Deployment Company, a new venture backed by more than $4 billion in investment. Anthropic is making an enterprise push with a $1.5 billion enterprise AI venture.. Microsoft also recently announced a $2.5-billion ‘Frontier Company’ unit, staffed by 6,000 FDEs. 

Discussing this trend, Lambu said the focus has clearly shifted from AI creation to AI deployment. "This year, the buzz was around AI creation—what does AI do, what kind of models are there. Now the conversations have moved from appreciating AI creation... to the AI deployment conversation. So now, as those conversations get real, there is a strong demand for FD engineers in the ecosystem," he said.

Lambu noted that Microsoft's expansion of forward-deployed engineers resembled the early days of cloud computing, when hyperscalers built their own professional services arms before ultimately partnering with or outsourcing much of the implementation work to systems integrators such as LTM. 

The latest investments by AI companies, according to Lambu, are an opportunity rather than a competitive threat, contending that the global supply of forward-deployed engineers still remains limited and that demand for such talent is likely to far outstrip current availability.

LTM will also establish a dedicated Claude Centre of Excellence to develop agentic MVPs, reference architectures and governance frameworks covering responsible AI.

Zoom Out

LTM’s message to investors was that the industry's first AI cycle, where clients used generative AI to negotiate lower prices, is largely over. The next phase will be defined not by productivity debates but by enterprise-scale deployment. 

By building a 1,000-strong forward-deployed engineering workforce before demand fully materialises, the company is betting that when AI adoption finally catches up with the hype, it will already have the delivery model clients need.

LTM’s shares rallied around 5% intraday on July 13 following the results.