Tata Consultancy Services is witnessing a gradual improvement in demand conditions as clients demonstrate increased willingness to invest in projects that deliver clear and immediate returns on investment. The positive momentum, first observed in the second quarter, has continued into Q3 and is expected to extend into Q4, according to company management.

AI Demand Accelerates Across Client Base

The company's artificial intelligence portfolio has emerged as a significant growth driver, with management reporting substantial progress across multiple metrics:

Executive Director, President and COO Aarthi Subramanian highlighted that while discretionary spending has not broadly rebounded, specific areas—particularly artificial intelligence—have demonstrated clear uptick. The number of AI-led projects executed in Q3 increased compared to Q2, indicating growing demand in targeted segments.

Full-Stack AI Strategy Drives Competitive Position

CEO and Managing Director K Krithivasan outlined TCS' comprehensive approach to AI services, rejecting suggestions that Indian IT companies lack credible AI capabilities. The company unveiled its full-stack AI strategy during the quarter, encompassing infrastructure to intelligence solutions. This strategy enables TCS to support customers across multiple layers, including building AI data centres, developing models, creating agentic platforms, and deploying enterprise-wide solutions.

The company is proactively engaging clients through "innovate with AI" sessions, helping identify, implement, and scale high-impact AI use cases while accelerating production deployment timelines. Management expressed confidence in TCS' ambition to become the world's largest AI-led services company.

Revenue Performance and Market Dynamics

TCS reported solid operational performance during the quarter:

The revenue growth reflected typical Q3 seasonality patterns, with balanced contributions from both international and domestic segments. Management clarified that the BSNL deal remained largely flat and did not materially contribute to growth during the quarter.

Margin Management and Competitive Strategy

Addressing margin pressure concerns amid heightened competition, Krithivasan explained that TCS maintains competitiveness at the deal level while managing margins at a portfolio level. The company does not impose margin thresholds at individual project levels, instead focusing on efficient delivery, productivity gains, and pyramid optimization after securing deals. Pricing conditions have remained stable to slightly positive.

Market Outlook and Growth Prospects

Management expressed cautious optimism about future prospects, noting that US market clients remain selective rather than fully discretionary in their spending approach. Decision-making processes have improved compared to previous quarters, with clients evaluating projects based on specific payback periods and value propositions.

While stopping short of reaffirming formal guidance, Krithivasan indicated that TCS continues to aspire to deliver higher international revenue in FY26 compared to FY25. AI-led services are expected to remain a key growth engine, supported by the company's comprehensive strategy and expanding client engagement across verticals.

Tata Consultancy Services is witnessing gradual improvement in demand conditions as clients demonstrate increased willingness to invest in projects that deliver clear and immediate returns on investment. The positive trend that emerged in the second quarter has continued into Q3 and is expected to carry forward into Q4, according to company management.

AI Demand Accelerates Across Client Base

The company's artificial intelligence portfolio has shown remarkable growth, reaching significant milestones across its client ecosystem. TCS has achieved substantial penetration in AI adoption among its largest clients, with engagement deepening across various industry verticals.

K Krithivasan, CEO and Managing Director, noted that while discretionary spending has not broadly rebounded, specific areas—particularly artificial intelligence—have demonstrated clear uptick in demand. The number of AI-led projects executed in Q3 increased compared to Q2, indicating sustained momentum in this segment.

Full-Stack AI Strategy Unveiled

TCS has positioned itself to become the world's largest AI-led services company through its comprehensive full-stack AI strategy. The approach encompasses multiple layers of AI implementation, from infrastructure development to intelligence deployment.

The company's AI capabilities include:

• Building AI data centres
• Developing AI models
• Creating agentic platforms
• Deploying enterprise-wide solutions
• Supporting customers across infrastructure to intelligence layers

Aarthi Subramanian, Executive Director, President and COO, highlighted that TCS proactively helps clients identify, implement and scale high-impact AI use cases through "innovate with AI" sessions, which accelerate production deployment timelines.

Financial Performance and Growth Metrics

TCS reported steady financial performance in Q3 with broad-based revenue growth across markets. The company maintained its competitive positioning while managing margins through operational efficiency improvements.

Krithivasan explained that TCS manages margins at a portfolio level rather than imposing thresholds at individual project levels. The company's differentiation stems from efficient delivery, productivity gains and pyramid optimisation after winning deals.

Market Outlook and Strategic Direction

Management expressed cautious optimism about future prospects, noting that clients remain selective in their spending decisions. Decision-making has improved compared to previous quarters, with clients making project-by-project evaluations based on payback periods.

While stopping short of reaffirming formal guidance, Krithivasan indicated that TCS continues to aspire to deliver higher international revenue in FY26 compared to FY25. AI-led services are expected to remain a key growth engine driving the company's expansion strategy.

The BSNL deal impact was clarified as largely neutral, not materially contributing to the quarter's growth. Overall, the company sees sustained momentum in AI adoption and gradual improvement in client engagement across its service portfolio.