Not AI models, AI applications are quietly driving India’s revenue streams: Report

Over the past two years, the conversation around Artificial Intelligence (AI) has evolved from AI chatbots to models that are faster, more reliable, and are being increasingly deployed in real-world use cases. But behind the visible shift, there is a quieter battle that is reshaping the revenue streams.

According to a SenseAI report titled “State of AI,” global investment in AI reached $800 billion in 2025, with venture capital alone accounting for $226 billion. However, the majority of this capital is no longer focused on building better models. Instead, it is coming from applications, where AI is actually being used, commercialised, and monetised.

India’s structural advantage

With the growing AI adoption, we have now entered the "Application Phase" of AI. In India, this shift is characterised by three core pillars: 

- Vertical AI, which includes models trained for healthcare, legal, or financial applications. 

- Wrapper evolution, where companies are building “compound AI systems” that use multiple AI models together.
- Lastly, India is also scaling in cost-efficient ways by relying on existing models. 

The country is also making a significant impact across enterprise/SaaS, consumer tech, and regional language AI, while Global Capability Centres (GCCs) are increasingly evolving into innovation hubs rather than just support centres.

India’s role from “back office" to "AI engine"

According to the report, over 1,200 AI startups across India's ecosystem, which is 75.4% of all Indian AI startups, are building at the application layer. It also revealed that over 80% of all AI funding in the country is centred around applications and tooling.

In addition, 60% of startups are generating revenue early in India. “India is building a decisively application-first ecosystem — growing rapidly but also very differently, and with far less capital than the US or China,” the report stated.

“This ecosystem resembles SaaS 1.0 but AI-native," the report observes. "Revenue-first DNA, global ambition, cost arbitrage, domain understanding and deep engineering talent position India to lead in AI applications,” it added.

India is still in the early stages of competing with global tech giants and entering the “model wars.”However, it has a large developer base and a strong industry expertise to build AI tools that actually solve real-world problems, and taking AI economy forward.