Tata Consultancy Services (TCS) is a global leader in IT services, consulting, and business solutions, with over five decades of experience in delivering digital transformation to enterprises. A part of the Tata Group, TCS is one of the largest IT services companies globally, serving clients across various industries in over 50 countries.
Macro and Financial Overview
CEO K. Krithivasan highlighted that discretionary spending delays, project deferrals, and decision paralysis—especially in the U.S. and Europe—intensified, continuing the trend observed in Q4 FY25. As a result, revenue declined by 3.1% YoY in constant currency.
- Revenue: ₹63,437 crore ($7.42 billion)
- YoY Revenue Growth: -1.1% in USD terms | +1.3% in INR terms
- Operating Margin: 24.5%
- Net Margin: 20.1%
- Total Contract Value (TCV): $9.4 billion, up 13.2% YoY
- Free Cash Flow: $1.3 billion
- Dividend Declared: ₹11/share
Segment-Wise Performance and Commentary
BFSI (Banking, Financial Services & Insurance)
- Performance: Cautious environment in North America, softness in Europe.
- Trends:
- Tech investments delayed.
- High interest in GenAI, legacy modernization, and compliance.
- Strong demand for digital solutions in wealth and insurance.
- Example: Banks are modernizing mainframes to reduce costs and boost resilience.
Consumer Business Group (CBG)
- Performance: Most adversely impacted segment.
- Trends:
- Delayed project milestones and funding delays.
- Transformational projects still continue.
- Example: TCS helped a U.S. retailer implement a SaaS-based product information platform improving SKU speed by 3x.
Manufacturing
- Performance: Minor growth.
- Trends:
- Automotive segment weak; overall push to reduce tech debt.
- Example: Jaguar TCS Racing—Digital Twin simulations via TCS’s V3M model optimized race preparation.
Life Sciences & Healthcare
- Performance: Cautious spending; cost pressures dominate.
- Trends:
- AI being explored for core system modernization.
- Focus on R&D and operational efficiency.
- Example: U.S. Medicaid reforms impacted insurers’ margins significantly.
Energy, Resources & Utilities (ERU)
- Performance: Decline due to geopolitical/policy changes.
- Example: TCS helped a U.S. utility firm with AMI transformation, improving outage and energy management.
Technology & Services (Tech SS)
- Performance: Sustained growth.
- Trends:
- AI at the core of innovation.
- Focus on cost savings and operational transformation.
Communications, Media & Information Services (CMI)
- Performance: Realigning priorities amid stagnant subscriber growth.
- Example: Foxtel Group used TCS’s GenAI to optimize customer support, reducing costs and winning ISG Paragon award.
Products & Platforms
- ignio™: Strong AI adoption for autonomous enterprise solutions.
- TCS BaNCS™: Major go-lives with Now Pensions and Lloyd Banking Group in the UK.
- TCS MasterCraft™: Released with GenAI for legacy modernization, promising 70% cost savings.
- TCS iON: Continued engagement with IITs/IIMs for assessments.
AI, Data, and Cloud Services (by COO Aarthi Subramanian)
- AI Adoption: Moving from PoCs to production-scale rollouts.
- New AI Offerings: Agentic AI and WisdomNext platform being scaled.
- Case Study 1: AmTrust Insurance used LLMs to reduce quote generation from 30 mins to 5 mins.
- Case Study 2: Owens Corning partnered for AI-powered knowledge automation.
- Cloud Transformation: Enabled a midnight launch for a gaming retailer across 1000+ stores.
Cybersecurity
- Growing traction in AI-based threat detection and Identity & Access Management.
- Examples:
- Securing AI assets for a European transport firm.
- IAM maturity improvements for a biopharma major.
TCS Interactive
- Focus on AI-driven creative marketing.
- Example: Automotive OEM used TCS’s TwinX platform for precision after-sales campaigns, improving dealer visits 5x.
Workforce Metrics
- Headcount: 613,069
- Attrition (IT services): 13.8% (up 50 bps QoQ)
- Net Reduction: ~5,000 employees
- Investments: 15 million hours in upskilling; 114,000 staff now trained in advanced AI
Question and Answer Session Highlights
Q1: Apart from the BSNL deal, are there any client-specific issues currently impacting revenue?
Krithivasan: No, we are not experiencing any client-specific challenges apart from the BSNL situation.
Q2: Are you still confident that FY26 will be better than FY25 overall?
Krithivasan: We are confident that international markets will perform better in FY26 than in FY25. Achieving overall growth at the company level is our aspiration, but it is a high bar.
Q3: Has client decision-making improved with global trade deal announcements (e.g., China, UK)?
Krithivasan: Not yet. Trade deal specifics, such as tariffs, are still pending, and we believe uncertainty will persist until those are finalized.
Q4: Have all the project delays and pauses already been reflected in Q1, or will some spill into Q2?
Krithivasan: Most delays are accounted for in Q1. A small residual impact may be felt in Q2, but if no further delays occur, Q2 should be better than Q1.
Q5: With the BSNL exit, margins are still below pre-BSNL levels. Why?
Samir Seksaria: Year-on-year margins are down only 20 bps. We’ve continued long-term investments in people and capacity. There’s a mismatch between planned capacity and actual demand, affecting leverage. We aim to tighten this going forward.
Q6: Is your international revenue guidance in USD or constant currency?
Samir Seksaria: It’s in constant currency terms, comparing like-for-like.
Q7: Are customers demanding productivity benefits through AI in deals?
Krithivasan: Yes, productivity expectations—especially with AI—are part of large deal negotiations, but typically built into the deal at signing, not mid-course.
Q8: Is deal revenue conversion being impacted by AI-infused productivity?
Krithivasan: No. Productivity commitments are factored at the time of signing, so they don’t hinder revenue conversion.
Q9: How is the deal pipeline shaping up post Q1?
Krithivasan: The pipeline remains strong and well-distributed across industries and geographies. We’ve successfully replenished the pipeline post Q1 closures.
Q10: Will the new BSNL contract ramp-up hurt margins again?
Samir Seksaria: There may be a slight mix impact. But we’re focusing on utilization, pyramid optimization, and productivity to improve margins.
Q11: How dependent is utilization recovery on international revenue growth?
Samir Seksaria: While growth would help, we also plan to optimize capacity to improve utilization irrespective of revenue movement.
Q12: Why are employee costs high despite lower headcount and BSNL exit?
Samir Seksaria: Besides hiring, we gave higher QVA (Quarterly Variable Allowance) and promotions this quarter, which added to direct costs.
Q13: BFSI revenues dipped but BaNCS platforms are doing well—what’s the outlook?
Krithivasan: BFSI in North America and UK showed slight growth; decline came from Europe due to completion of a large engagement. Medium to long-term outlook is strong.
Q14: High-tech is improving while some peers faced pressure. Are you seeing similar issues?
Krithivasan: Overall, the segment is growing well. A few clients had issues, but in general, growth remains strong.
Q15: When will the new BSNL order ramp up?
Samir Seksaria: We’ve received an advance purchase order; actual ramp-up will begin after circle-wise POs are received, following a similar path to the earlier 100,000-site project.
Q16: Why hold excess capacity despite 13.8% attrition and weak demand?
Samir Seksaria: We built capacity anticipating demand that didn’t materialize in Q1. It was pre-planned and will help service upcoming opportunities.
Q17: Will employee cost as a % of revenue reduce as growth returns?
Samir Seksaria: Yes, optimization efforts are underway. The mix shift from third-party to own employees also affects comparison to prior quarters.
Q18: BFSI TCV is strong, but revenue is under pressure—why?
Krithivasan: Some signed deals are delayed, rescheduled, or running at slower ramp-ups. This decouples TCV strength from short-term revenue realization.
Q19: Sequentially, is demand worsening in BFSI?
Krithivasan: In revenue terms, a minor growth was seen in BFSI North America and UK, but Europe saw contraction. Environment varies by geography.
Q20: Are clients signing deals but delaying execution?
Krithivasan: Yes. Some clients are stretching timelines, slowing ramp-ups, or spreading costs, causing delay in revenue realization despite solid bookings.
Q21: Are you confident about international business improving in Q2?
Krithivasan: Yes, we are optimistic about international business performance in the upcoming quarter.
Q22: Why is North America growth flat over past 12 quarters? Are you losing share?
Krithivasan: We’re not losing share. We’re winning key engagements, but revenue growth is offset by project delays and slow execution.
Q23: Some $100M+ clients dropped below that level—should this concern investors?
Krithivasan: It’s more a reflection of temporary revenue contraction or FX impact. Once growth resumes, these clients will likely move back above $100M.
Q24: Why is employee cost rising when headcount is not?
Samir Seksaria: It includes QVA increases and tactical interventions like promotions, not just hiring.
Q25: Are AI-infused renewals becoming standard in top 100 clients?
Krithivasan: Yes, we proactively embed AI into both renewals and new engagements, not just waiting for contract refreshes.
Q26: How are Agentic AI solutions being monetized—fixed price, T&M, or license?
Krithivasan: It varies. Some are fixed-price, some T&M initially due to evolving use cases, and some are even outcome-based. The model depends on client maturity and project scope.