3 Mid and Small-Cap IT Stocks Expanding Aggressively in the AI Sector to Keep on Your Radar

Synopsis: India’s AI opportunity is creating a new set of winners in the IT sector. While industry giants continue their AI journey, mid and small-cap players are rapidly expanding AI capabilities through acquisitions, engineering expertise, and growing digital transformation demand.

Artificial intelligence has moved beyond being a technology buzzword to becoming the next major growth driver for the global IT services industry. As enterprises accelerate investments in AI, cloud infrastructure, and data engineering, Indian IT companies are racing to position themselves for the next wave of digital transformation.

While large IT firms continue to dominate the sector, investors are increasingly focusing on mid and small-cap companies that are making AI a meaningful part of their business through strategic acquisitions and specialised engineering capabilities. Companies like Coforge, Persistent Systems, and Cyient are expanding their AI footprint while also delivering strong operational execution, making them key players to watch in India’s evolving AI ecosystem.

AI demand is reshaping India’s IT landscape

Global enterprises are rapidly integrating artificial intelligence into software development, customer engagement, product engineering, and business operations. This has created a significant opportunity for IT service providers that possess capabilities across AI, cloud computing, data engineering, and digital product development.

Unlike traditional outsourcing, AI-led projects typically involve higher-value engineering work and deeper client engagement. IT companies, with their focused business models and quicker execution, are increasingly winning these opportunities through targeted acquisitions and specialised expertise.

Coforge is scaling AI through transformational acquisitions

With a market cap of Rs.64,886 Crore,Coforge shares closed at Rs.1465.8 Coforge has emerged as one of the most aggressive AI-focused players among India’s mid-cap IT companies. Its proposed $2.35 billion acquisition of Encora is expected to add nearly $2 billion in AI-led engineering, cloud, and data services revenue in FY27, significantly expanding its global engineering capabilities.

The company’s execution has also remained strong. During the March 2026 quarter, revenue rose to ₹4,450 crore, compared with ₹3,422 crore a year earlier. Operating profit increased to ₹876 crore from ₹527 crore, while net profit more than doubled to ₹666 crore from ₹307 crore. Operating margin also expanded to 20%, highlighting improving profitability alongside growth.

Coforge also reported a healthy $648 million order intake in the fourth quarter of FY26, reflecting sustained demand for its digital transformation and AI-led services.

Persistent Systems continues strengthening AI-led engineering

With a market capitalization of Rs. 73,749 crore and a closing price of Rs. 4,675 on Friday, Persistent Systems has consistently focused on digital engineering, and artificial intelligence has become a natural extension of its strategy. The company recently acquired the AI division of Estonia-based Concise Systems, strengthening its expertise in AI product engineering, distributed systems, cloud-native technologies, and intelligent software development.

Its financial performance reflects the growing demand for these services. Revenue increased to ₹4,056 crore in the March 2026 quarter from ₹3,242 crore a year ago. Operating profit climbed to ₹768 crore, while net profit surged to ₹529 crore, compared with ₹396 crore in the corresponding quarter last year. The company also maintained a healthy 19% operating margin, demonstrating its ability to convert revenue growth into stronger earnings.

With enterprises increasingly investing in AI-enabled software development, Persistent continues to benefit from its deep engineering capabilities and expanding global client base.

Cyient is expanding AI capabilities across industries

With a market cap of Rs.9,991 Crores and closing price of Rs.899 on Friday, Cyient is strengthening its AI portfolio through the $218 million acquisition of TAO Digital Solutions, which adds expertise in AI-enabled platforms, cloud technologies, and advanced data engineering.

The acquisition also enhances Cyient’s presence across high-growth industries such as aerospace, automotive, healthcare, rail, and communications, where demand for AI-powered engineering solutions continues to rise.

However, unlike its peers, the company faced a relatively softer quarter operationally. Revenue for the March 2026 quarter stood at ₹1,927 crore, broadly stable on a year-on-year basis, while operating profit declined to ₹222 crore from ₹298 crore. Net profit also fell to ₹66 crore compared with ₹186 crore in the year-ago period, reflecting pressure on margins and profitability. Even so, the TAO Digital acquisition positions Cyient to participate in the long-term growth of AI-led engineering and digital transformation services.

Why investors are watching these companies

The common thread across these three companies is their willingness to invest aggressively in AI capabilities rather than relying solely on traditional IT outsourcing. Strategic acquisitions, stronger engineering talent, and growing exposure to cloud and data services are enabling them to build differentiated businesses that are aligned with global technology spending trends.

While their near-term financial performance varies, each company is positioning itself to benefit from rising enterprise AI adoption. As organisations worldwide continue investing in automation, generative AI, digital engineering, and cloud infrastructure, India’s AI-focused IT companies could emerge as some of the biggest beneficiaries of the next technology investment cycle.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post 3 Mid and Small-Cap IT Stocks Expanding Aggressively in the AI Sector to Keep on Your Radar appeared first on Trade Brains.