From TCS To Infosys, Why Are IT Firms Facing Earnings Pressure? Zoho’s Sridhar Vembu Says…

Last Updated:April 18, 2025, 12:14 IST

‘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,’ says Zoho co-founder Sridhar Vembu.

Zoho’s Sridhar Vembu says the broader software industry has been quite inefficient, both in products and services.

Sridhar Vembu, co-founder of Zoho Corporation, has expressed concerns over the current state of the tech industry, suggesting that the challenges faced are more than just a temporary downturn or solely due to advancements in artificial intelligence.

In a post on X, 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.”​

He added that the broader software industry has been quite inefficient, both in products and services. 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.

“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. We have to challenge our assumptions and do fresh thinking,” Vembu said.

This perspective aligns with Vembu’s previous comments on the industry’s trajectory. Last month, he highlighted the trend of talented Indian-American youth shifting from engineering to finance, expressing concern over the long-term implications for innovation and societal development. He emphasised the importance of focusing on solving complex engineering challenges rather than prioritising financial gains.​

Vembu’s insights come at a time when the tech industry is grappling with rapid changes, including the integration of AI and evolving economic conditions. His emphasis on addressing foundational issues suggests a need for introspection and strategic planning within the sector.

IT companies have so far posted weak financial earnings for Q4 FY25, with India’s biggest IT company TCS reporting a 1.7 per cent decline in its net profit at Rs 12,224 crore. Wipro posted a weak forecast for the June 2025 quarter, adding to concerns over weak demand flagged earlier by rival TCS. Another IT major Infosys also posted a 11.7 per cent year-on-year decline in its net profit to Rs 7,033 crore for the fourth quarter ended March 2025 quarter (Q4 FY25).