bengaluru, May 5 -- A global technology giant's ambitious drive to dominate as an artificial intelligence powerhouse has come to bite Indian information technology outsourcers that rank the company as a priority client. Sonata Software Ltd, which entered Indian IT's $1 billion revenue club last year, recently said it was likely to record lower-than-expected revenue from its "largest client" for the January-March period, its final quarter of 2024-25. "...we would like to inform you that the revenue estimates for Q4 2024-25 from our largest client are likely to be lower than anticipated, resulting in lower revenue from our international business for the said quarter than previously envisioned during the previous analyst/investor call held on 6 February 2025," Sonata said in a 16 April stock exchange filing. During Sonata's third-quarter post-earnings call with analysts in February, the management had projected a revenue decline of 3.5% for the March quarter, attributing this to the company's biggest client account in the technology, media and telecommunications sector. Sonata Software's largest client is Microsoft Corp., accounting for upwards of $100 million in annual revenue for the Bengaluru-based company, according to four people with knowledge of the matter. Sonata's recent update to the stock exchanges is a rare instance of an Indian IT company calling out lower business from a top client. The company did not disclose if it was referring to Microsoft in its exchange filing or during its February post-earnings call, or the specific reason for the revenue decline from its top client. But industry experts have pegged this on Microsoft's increasing reliance on its own AI capabilities to handle tasks it had been outsourcing. If Microsoft's AI ambitions are expected to hurt Sonata's revenues, that would be a concern for India's other top IT outsourcers as well, considering they all count the US tech giant among their top clients. Microsoft, which follows a July-June financial calendar, ended its previous financial year with $245 billion in revenue. In other words, Microsoft is almost four times the size of Accenture Plc., the world's largest IT services company, by revenue.Sonata's domestic business, which includes reselling product licences, makes up 70% of its revenue. Outsourcing engineers to clients accounts for the remaining 30%. Two-thirds of Sonata's $1.04 billion revenue in 2023-24 flowed from Microsoft, according to an analyst. Of this revenue from Microsoft, a significant chunk came from selling the US company's product licences to Sonata's domestic clients, and the remaining from outsourcing engineers to Microsoft. Sonata's clarion call comes at a time when its larger peers have already started baking in GenAI-led efficiencies in their conversations with clients. While the bosses of Indian IT are confident of added demand brought about by Gen AI, analysts expect AI to consume much of the work pertaining to customer support, application maintenance and management. Sonata declined to reply to Mint's questionnaire citing a regulatory silent period. Homegrown IT services companies work with Microsoft in two primary ways. One, as system integrators for Microsoft's software products. If an ice cream chain wants to use Microsoft's software to manage its sales and finance, it can purchase the software from IT outsourcers like Sonata Software. Sonata will not just give the ice cream company access to Microsoft's software but also fit the software in its computers, earning extra money. Two, IT service providers send engineers to Microsoft to manage its software products. These engineers ensure the functioning and backend requirements of Microsoft's software sold to companies such as the ice cream chain....