Tata Consultancy Services Ltd. reported quarterly profit that topped analysts’ estimates, helped by cost-cutting measures and a gradually improving contract flow that helped drive growth at Asia’s largest IT services provider.
Net income rose 15% to 138.84 billion rupees ($1.4 billion) in the three months through September, the company said in a statement Thursday. Analysts expected 137.86 billion rupees on average. Sales climbed 11% to 731.88 billion rupees, helped by a decline in the Indian rupee versus the dollar and the euro.
TCS’ major customers in the US and Europe and remain cautious with large IT projects, with geopolitical tensions and elevated inflation weighing on economic growth. At the same time, artificial intelligence threatens to disrupt the traditional outsourcing business model of TCS and Indian peers such as Infosys Ltd.
As artificial intelligence tools from OpenAI and Anthropic PBC begin to reshape how clients procure software services, TCS’ traditional recipe for success — hiring armies of graduates to write code for clients such as Apple Inc., Boeing Co. and Bank of America Corp. — is under pressure. While the company has sought to harness AI for its own purposes, investors remain skeptical — the stock has lost half its value over the past two years.
TCS has also embarked on a massive cost-cutting drive. Natarajan Chandrasekaran, chairman of TCS parent Tata Group, predicted in June that AI agents would make up half the company’s workforce in the future. But he was also quick to add that AI will open up fresh opportunities.
Mumbai-based TCS has also rapidly expanded its artificial intelligence operations, saying annualized AI revenue reached $3.1 billion in the quarter. Examples include two recent deals with AI components: earlier this month, TCS announced it will bring US consumer electronics retailer Best Buy Co.’s India global capability center into its fold, and in August it signed a 1.25 billion euro ($1.4 billion) deal with Porsche AG for deploying AI, while also agreeing to buy its consulting unit.
The agreements with Porsche and Best Buy “represent a new category of transformation partnerships,” Chief Executive Officer K. Krithivasan said in a statement. “Together with our clients, we are building repeatable value platforms that will industrialize AI at scale.”
TCS has also partnered with OpenAI to build AI data centers and is in similar discussions with other tech giants. India is expected to need about 10 gigawatts of AI data center capacity over the next four years, and much of that is yet to be built. TCS is seeking to capitalize on the opportunity, Krithivasan has said.
What Bloomberg Intelligence Says
Accenture, Tata Consultancy Services (TCS), Infosys, Capgemini, Cognizant and HCL Tech’s calendar 2Q results reinforce our thesis that a meaningful IT spending recovery is slipping toward 2027. Rising AI activity isn’t yet enough to offset slow enterprise decision-making. Financial services is the clearest bright spot, supported by demand for modernization and AI with tangible returns.
-Tamlin Bason, analyst
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India’s $280 billion software services sector, led by TCS, began by offering cheap back office solutions to large international corporations, but they now provide a range of cloud, automation and AI services to multinationals including Citigroup Inc. and PepsiCo Inc. That’s made the Indian IT giants direct rivals to global technology services providers from Accenture Plc to International Business Machines Corp.