Global AI, digital-commerce trends to improve monetisation, profitability for Indian internet firms: Report
New Delhi, September 1
The global acceleration in artificial intelligence investment, digital advertising and convenience-led e-commerce is creating a favourable outlook for India's internet sector, said Elara Capital, adding improving monetisation, faster fulfilment and scale-driven profitability are expected to benefit major Indian e-commerce companies.
According to the report, e-commerce and food-tech platforms are increasingly demonstrating capital-efficient growth, even as major technology companies face near-term pressure on free cash flow (FCF) from heavy AI investments.
"AI investment continues to accelerate, with capex at Amazon, Meta and Alphabet up 68 per cent, 83 per cent and 100 per cent YoY, respectively," it said adding, "AI capex guidance has been raised by ~8- 10 per cent versus last quarter and is trending at ~2-3x last year's levels, signalling conviction in AI adoption despite near-term FCF pressure."
It further added, digital advertising trends in Q2CY26 reflected the growing role of first-party data and AI-powered targeting in driving ad performance and monetisation.
"Meta's advertising revenue grew 27 per cent YoY, supported by 14 per cent higher impressions and 12 per cent improvement in price per ad, as AI-led recommendations and targeting improved engagement and advertiser ROI," it said.
Likewise, Amazon's advertising revenue rose 26 per cent YoY to USD 19.8 billion, driven by sponsored products, Prime Video and live sports, along with AI-powered tools.
Notably, users interacting with sponsored prompts recorded 48 per cent higher conversion rates, underscoring AI's growing contribution to advertising monetisation and advertiser returns.
However, the report flagged "capital intensity remains a watchpoint" as BigTechs are temporarily slashing FCF to build AI capacity and "scaled commerce and food-tech platforms are increasingly converting growth into cash."
As per the report, pace of AI monetisation will determine whether the current free cash flow (FCF) pressure is temporary or structural.
At the same time, businesses should note, "Rising adoption of AI tools such as AgenticOS improved realization without a proportional increase in operating costs, supporting further operating leverage."
Overall, "the global acceleration in artificial intelligence (AI) adoption and sustained growth in digital commerce are strengthening the outlook for India's internet sector, with improving monetisation, faster fulfilment and scale-driven profitability offering positive read-throughs," as per Elara.
— ANI
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