Tata Consultancy Services has reported only modest revenue growth in the September quarter even as its artificial intelligence business expanded sharply, highlighting how AI is becoming a larger part of India’s biggest IT services company while traditional technology spending remains subdued.
TCS reported consolidated revenue of ₹73,188 crore for the second quarter of FY27, up 11.2% from a year earlier.
In constant-currency terms, however, revenue grew only 0.5% from the previous quarter, the company’s weakest September-quarter sequential growth in three years.
The slowdown came even as TCS’s annualised AI revenue climbed to $3.1 billion from $2.6 billion in the previous quarter.
AI now accounts for more than 10% of the company’s revenue on an annualised basis.
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AI Revenue Jumps Nearly 20% in One Quarter
TCS has been one of the few large Indian IT companies to disclose an annualised AI revenue figure.
In the June quarter, the company reported an AI revenue run rate of $2.6 billion.
By the end of September, that figure had increased to $3.1 billion, a rise of roughly 19% in a single quarter.
CEO K Krithivasan said TCS was seeing growing demand for AI-native business solutions, transformation of existing enterprise systems and more autonomous business operations.
The company says clients are increasingly moving beyond AI experiments and asking for technology that can be embedded into core business processes.
Traditional IT Spending Remains Weak
The rapid increase in AI revenue has not yet translated into strong overall growth.
Krithivasan said the broader demand environment remained largely unchanged.
Companies continue to scrutinise discretionary IT projects closely, particularly work that can be postponed without affecting essential operations.
That weakness has affected the wider Indian IT-services industry.
For decades, companies such as TCS, Infosys and Wipro grew by managing large technology operations, maintaining applications and supplying large teams of engineers.
AI is now changing that model because some of the same work can be automated or completed with fewer people.
AI Is Growing but Also Creating Pricing Pressure
AI presents an unusual challenge for IT services companies.
It creates a new source of revenue because customers need help adopting models, rebuilding systems and automating workflows.
But those same technologies can reduce the amount of labour required to complete conventional IT work.
Reuters reported that AI is contributing to pricing pressure and reducing spending on some traditional services even as demand for AI projects rises.
That means TCS has to grow its AI business fast enough to offset disruption elsewhere in its portfolio.
The September-quarter results show that transition is already underway.
Net Profit Rises 15%
TCS reported consolidated net profit of ₹13,884 crore for the quarter, up about 15% from a year earlier.
Its operating margin remained at 24%.
The company also declared a second interim dividend of ₹12 per share.
Cash generation remained strong.
TCS said net cash from operations was $1.48 billion, equivalent to 102.2% of net income.
Deal Wins Reach $9.6 Billion
Total contract value for the quarter was $9.6 billion.
That was slightly higher than the $9.5 billion reported in the previous quarter but below the $10 billion level recorded a year earlier.
The order book remains important because large IT contracts can take months or years before revenue is fully recognised.
TCS also announced several major partnerships during the quarter, including deals involving Porsche and Best Buy.
Porsche Deal Pushes TCS Deeper Into AI-Led Transformation
TCS announced a five-year strategic partnership with Porsche during the quarter.
Under the agreement, TCS will establish an AI Mobility Centre of Excellence for the German automaker.
The programme will focus on manufacturing, engineering, operations and customer experience.
TCS also plans to acquire 100% of MHP Management- und IT-Beratung, Porsche’s Germany-based management and IT consulting subsidiary.
The transaction remains subject to regulatory approvals.
The deal is significant because it combines conventional consulting and IT services with AI-led transformation rather than treating AI as a standalone software product.
Best Buy India Centre to Become AI Capability Hub
TCS also announced an agreement involving Best Buy’s Global Capability Center in India.
The centre will transition to TCS and is expected to be transformed into an AI Capability Center.
TCS says the partnership will combine the existing team’s retail knowledge with its engineering and AI capabilities.
Global Capability Centers have become an important part of India’s technology economy.
Large multinational companies use them for engineering, analytics, finance and technology development rather than simply back-office support.
TCS is now positioning AI transformation of those centres as another growth opportunity.
Banking and Manufacturing Lead Growth
Banking, financial services and insurance remained TCS’s largest industry segment.
BFSI revenue grew 2.5% sequentially in constant currency during the quarter.
Manufacturing and Technology & Services each grew 3.1%.
Consumer businesses declined 0.7%, while Energy, Resources and Utilities slipped 0.5%.
This uneven performance shows why the headline company growth number remained modest despite strength in several sectors.
India Revenue Drops Sequentially
TCS’s India business showed one of the sharpest quarter-on-quarter declines.
Revenue from India fell 10.3% sequentially in constant currency, although it remained 6% higher than a year earlier.
By comparison, the UK grew 3.5% sequentially, Asia Pacific rose 2% and Latin America increased 4.3%.
North America, TCS’s largest market, grew only 0.4%.
Weak growth in North America remains important because nearly half of TCS’s revenue comes from that region.
Workforce Rises Above 598,000
TCS ended the quarter with 598,056 employees, up from 593,798 at the end of June.
Its trailing 12-month attrition rate in IT services fell slightly to 13.3% from 13.6%.
The company said employee learning hours increased 17% sequentially to 17.1 million.
TCS has been investing heavily in reskilling workers as AI changes the type of work clients require.
That becomes increasingly important as automation reduces demand for some traditional roles while creating demand for AI engineering, data, cybersecurity and transformation skills.
AI Is Changing the Indian IT Services Model
India’s IT outsourcing industry historically built its economics around large workforces and billable hours.
Generative AI and automation are challenging that approach.
If software development, testing, customer support or infrastructure management can be automated, clients may expect the same work to cost less.
IT companies are therefore trying to shift toward outcome-based contracts, AI-led consulting and higher-value transformation programmes.
TCS’s Q2 numbers provide one of the clearest signs of that transition.
Overall growth remains slow, but AI is becoming a material revenue business rather than a future promise.
Cybersecurity Remains a Growth Priority
TCS also said cybersecurity continues to rank high among client priorities.
Chief Operating Officer Aarthi Subramanian said companies were increasing their focus on resilience and recovery alongside AI adoption.
That combination is important because introducing autonomous AI systems into business operations can increase the number of systems, identities and data flows that companies need to secure.
For TCS and other large IT providers, cybersecurity may therefore become increasingly tied to AI transformation rather than treated as a separate service.
The Real Test Is Whether AI Can Lift Overall Growth
The company’s AI revenue has grown quickly.
But TCS’s overall growth remains modest.
That is the central question behind the September-quarter results.
If AI projects simply replace declining traditional IT revenue, the company may see major changes in the composition of its business without a comparable increase in overall sales.
If AI creates entirely new categories of spending, it could eventually restore stronger growth.
The next several quarters will show which of those effects becomes dominant.
What this means for you
TCS’s results show that AI is already reshaping India’s largest IT services company, not merely adding another product line. For employees and the wider industry, growth is increasingly likely to come from AI, cybersecurity and transformation skills while routine technology work faces greater automation and pricing pressure.
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