Hexaware AI-native services and sharper deal pursuit aim to counter pricing deflation

Investment View and Valuation

In its August 23, 2026 company update, ICICI Securities retained a HOLD recommendation on Hexaware Technologies with a target price of Rs 580, based on 20x CY27E EPS. The broker sees potential for Hexaware’s new AI-led services and more focused go-to-market motion to partly offset the deflationary impact of generative AI on traditional IT-services pricing. However, total contract value from these new AI opportunities remains a low proportion of the current pipeline.

Zero Friction Portfolio and Addressable Markets

Hexaware has introduced its Zero Friction portfolio of AI-native service lines, organised around AI for IT and AI for Business. An Infinite Trust layer covers data readiness for AI, observability and governance, and security.

The broker considers Zero Tech Debt, Zero Vulnerability, Zero License and the Infinite Trust offerings to be incremental demand areas that expand Hexaware’s addressable market. In contrast, Zero Backlog, Zero Defects and Zero Tickets aim to drive AI-led productivity within the company’s existing application-management-services and software-development-life-cycle book. These offerings are therefore potentially deflationary, although they can defend or increase wallet share.

Early Execution Evidence

Management cited early evidence of execution for the new offerings. Zero License had completed deals with four clients within eight months of launch.

• In one Zero Tech Debt example, Hexaware reduced migration time by 88 per cent and post-migration defects by 75 per cent for a North American bank.
• An airline modernisation programme was compressed from three years to 1.25 years, and the client expanded its award from five to 25 epics.
• For Zero Tickets, one client achieved a 3.2x reduction in incidents, 59 per cent headcount optimisation and 41 per cent tower-cost savings. A 22 per cent contract-value reduction was more than offset by a 31 per cent rise in total account revenue from additional statements of work.

Go-to-Market Strategy and Growth Outlook

Hexaware’s sharpened go-to-market plan includes a dedicated large-deal pursuit team for opportunities above US dollar 50 million, revenue-linked commission incentives to attract hunting talent, a strengthened new-logo team with vertical-domain expertise, proactive deal pursuit among existing clients, and a day-zero execution and mobilisation team.

Management acknowledged likely AI-led deflation of around 20 to 25 per cent annually for the IT-services industry over the next four years. Despite this pressure, it guided for an exit run-rate of more than 10 per cent year-on-year growth by end-Q4CY26. ICICI Securities models constant-currency revenue growth of 6.1 per cent in CY26E and 10.5 per cent in CY27E.

Commercial Model and AI Capability Build-out

Management is shifting commercial models from effort-based pricing towards output-based and AI-native value or outcome-based contracts. Under human-plus-technology AI-enabled contracts, Hexaware bears token costs.

The company’s token-cost strategy comprises reducing token use through prompt, context and retrieval design, routing work to smaller models where possible, and optimising its proprietary AI harness. Management estimates token and inference costs at around 3 to 4 per cent of total company cost currently, although this should increase as AI adoption scales.

Hexaware is also building its AI capability, targeting 250 forward-deployed engineers and 1,000 AI architects within 12 months. Around 50 employees had qualified as AI architects, while the internal pipeline was certifying roughly 100 more every few months.

Financial Estimates

Key Risks and Potential Upside

Downside Risks

• Leadership changes.
• Hexaware’s lower margin profile relative to mid-tier IT-services peers.
• Adverse vendor consolidation or client insourcing.
• Generative-AI-led deflation.

Upside Risks

• Faster-than-expected growth in net-new AI services.
• Rupee depreciation against the US dollar.
• A global macroeconomic improvement.