As enterprises enter a new wave of renewals and transformation decisions in 2026, a critical disconnect is emerging in the managed services market. Providers are rapidly embedding AI into delivery and capturing productivity gains, while many enterprise agreements still reflect legacy cost structures.

AI is now table stakes across the managed services landscape, embedded in how services are delivered and how value is positioned to clients.

Julie Sweet (CEO, Accenture):
“AI is permeating everything we do…even when it isn’t specific AI, clients are looking at our AI credentials because everything is aimed to get to AI…you have to have it to win.”

For CIOs and procurement leaders entering 2026 renewal cycles, large transformations, or vendor consolidation events, this shift creates a near-term decision risk. Providers are already realizing financial benefits from AI through productivity gains and margin improvement, while many enterprise agreements remain anchored in outdated delivery models, creating a growing risk of overpaying for services that are now delivered faster, with fewer resources, and at lower cost to the provider.

Given the multi-year nature of most managed services contracts, organizations making sourcing or renewal decisions in the next 6-18 months risk locking into agreements that do not reflect how services are currently being delivered if deal teams do not adapt to current market dynamics.

The financial results this quarter reinforce this trend: across the sector, revenue growth remains modest and, in several cases, below prior-year levels, while margins are stable or improving and deal pipelines remain active. Taken together, this points to a market where value is being redistributed rather than expanded, with AI driving gains in productivity, profitability, and commercial model evolution ahead of any industry-wide revenue acceleration.

Below are key takeaways and themes from key managed services providers from this earnings cycle, focusing on where financial performance, deal activity, and AI adoption intersect.

Financial Performance Signals a Market in Transition

Across the major MSPs, this quarter’s results show a consistent pattern when viewed against historical performance with growth present but not accelerating In several cases, it remains below prior-year levels. At the same time, margins are stable or improving and overall deal activity remains strong.

Recent performance across some of the key managed services providers reflects that shift of limited earnings growth but margin stabilization/expansion:

• Accenture delivered mid-single-digit growth, with managed services up ~10% year over year and margins in the mid-teens, solid but below historical double-digit growth periods
• Cognizant reported ~6.4% year-over-year growth with ~16% operating margins, one of the stronger performances this quarter but still below prior peak growth levels
• Infosys reported 1.7% year-over-year growth reflecting a slowdown from prior periods where growth was in the mid-single-digit range; margins remained above 21%
• Tech Mahindra returned to growth at 2.7% year over year, with roughly 300 basis points of margin expansion
• Wipro remains under pressure with -1.2% year-over-year growth, while operating margins have held steady at ~17.5%

At the same time, deal momentum remains elevated:

Salil Parekh (CEO, Infosys): “Large deals were at $4.8 billion…with 57% net new.”

Mohit Joshi (CEO, Tech Mahindra): “We recorded our highest quarterly deal bookings in the last five years.”

And yet:

Jayesh Sanghrajka (CFO, Infosys): “Discretionary spend is under pressure, and decision-making is slow.”

In prior cycles, strong bookings would typically translate into accelerating revenue growth. In this cycle, that conversion is slower and growth remains uneven. This indicates that providers are sustaining performance through backlog, pricing discipline, and productivity gains rather than true demand expansion.

CIO & Deal-Maker Takeaway

This is not a broad-based demand expansion. Enterprises should not assume providers have strong pricing power driven by growth. Instead, providers are competing aggressively for long-term revenue while protecting margins through efficiency gains. This dynamic increases buyer leverage in sourcing events, but only if organizations explicitly challenge pricing assumptions tied to legacy delivery models.

Cost Takeout Driving AI Spend

One of the clearest themes across this earnings cycle is how enterprises are actually paying for AI. While providers continue to position AI as a growth driver, the underlying funding model tells a different story. Organizations are not expanding budgets to support these initiatives. Instead, they are reallocating existing spend, with a heavy focus on cost reduction and efficiency gains within current environments.

Accenture framed the demand environment clearly:

Julie Sweet (CEO, Accenture): “Clients…are working with us to create more investment capacity to increase their spend in new areas.”

The investment capacity Accenture referenced is driven by cost reductions to support initiatives in other areas critical to organizations. Other providers reinforced the same point and provided more details around where customers are focusing:

Jayesh Sanghrajka (CFO, Infosys): “Clients are prioritizing cost takeouts and AI-led productivity deals while discretionary spend remains soft.”

Srini Pallia (CEO, Wipro): “A significant piece of this pipeline is around cost optimization and vendor consolidation…[clients] want to reinvest these savings into AI.”

This means AI is not creating new spend but is being funded by extracting value from existing contracts. However, in many cases, the financial benefits of these productivity gains are captured first by providers, not enterprises.

AI is completely reshaping productivity improvement expectations in all categories of managed services (applications, infrastructure, etc.) in terms of percentage improvement in costs on a year-over-year basis and in the aggregate.

CIO & Deal-Maker Takeaway

• Require line-item transparency on productivity gains
• Tie AI funding to contractual cost reductions
• Ensure savings are shared, not retained by the provider

New Commercial Models Are Emerging Alongside AI-Led Transformation

A consistent theme across this earnings cycle is how AI is influencing not just delivery, but the structure of managed services agreements themselves.

Providers are increasingly incorporating AI into how services are priced and contracted. This includes greater use of subscription-based models and non-FTE constructs tied to AI-enabled delivery. These approaches are often introduced as part of broader transformation programs rather than standalone pricing changes.

Aiman Ezzat (CEO, Capgemini): “A…mega deal…based on a true agentic AI-led transformation solution…operating on a non-FTE based commercial model.”

Julie Sweet (CEO, Accenture): “We are expanding into…subscription and licensing revenue models…with healthy margins.”

Jayesh Sanghrajka (CFO, Infosys): “Clients are increasingly seeking…outcome-based engagement models.”

These models can improve alignment, but they also shift pricing complexity and risk toward the enterprise if not properly structured.

CIO & Deal-Maker Takeaway

AI-driven commercial models require a higher level of scrutiny. As organizations evaluate these structures, it is important to establish clear visibility into pricing drivers, define measurable outcomes, and build in mechanisms that allow for adjustment over time. Without that level of clarity, it becomes difficult to assess value and maintain control over long-term costs.

AI Is Expanding Deal Scope and Driving Larger Programs

Another clear trend from this earnings cycle is how quickly AI initiatives are scaling beyond initial use cases.

What often begins as a targeted effort is increasingly evolving into broader transformation programs that touch core systems, data platforms, and enterprise-wide processes. Providers are describing a consistent progression from foundational modernization into more advanced AI-enabled capabilities.

Julie Sweet (CEO, Accenture): “We continue to see at least one out of every two advanced AI projects lead to a data project.”

Mohit Joshi (CEO, Tech Mahindra): In relation to AI activities: “Client programs are shifting from pilots to scaled multi-year initiatives.”

This expansion increases contract scope, duration, and cost exposure often without equivalent renegotiation of pricing structures.

CIO & Deal-Maker Takeaway

AI programs often grow beyond their original scope, particularly as they become more integrated with core systems and data environments. As a result, it is important to establish clear boundaries early, define how scope expansion will be governed, and ensure pricing mechanisms are in place to maintain cost predictability as programs evolve.

What This Means for Enterprise Negotiations

Taken together, the financial results and executive commentary point to a market in transition. Growth remains modest and uneven compared to prior periods, while margins have held up more strongly than expected. AI is clearly influencing deal activity, but its impact is showing up first in productivity, profitability, and evolving commercial models rather than broad-based revenue growth.

This points to a shift in how value is being captured across the market. Providers are already benefiting through improved efficiency, stronger margins, and new revenue structures. The key question for enterprise buyers is whether their agreements reflect that same reality.

We are already seeing leading organizations act on these dynamics. UpperEdge has helped clients realign contracts to reflect AI-driven delivery, capture productivity-driven savings, and establish commercial models that maintain long-term cost control. As these market shifts accelerate, the ability to translate these insights into your managed services agreements will directly translate into value capture for your organization.

Don’t lock into outdated pricing as AI reshapes delivery. Register for our webinar to understand how to protect value in your next deal.