Tata Consultancy Services (TCS), India's largest IT services company, has announced its financial results for the second quarter, showcasing robust performance and unveiling ambitious plans to lead in the AI-driven technology landscape.

Strong Financial Performance

TCS reported a consolidated revenue of ₹65,799.00 crore for Q2, marking a 3.7% quarter-on-quarter growth. The company's net profit stood at ₹12,075.00 crore, representing an 8.4% year-on-year increase. Operating margin expanded by 70 basis points quarter-on-quarter to reach 25.2%.

Key Financial Highlights

Strategic AI Initiatives

CEO K Krithivasan announced TCS's ambition to become the world's largest AI-led technology services company. Key initiatives include:

1. Establishment of a new business entity for AI infrastructure
2. Plans to build a 1 GW AI data center in India
3. Acquisition of ListEngage, a US-based Salesforce partner, for $72.80 million

Segment Performance

The Banking, Financial Services, and Insurance (BFSI) sector continued to lead, contributing 32.2% of the total revenue and showing a 1.1% quarter-on-quarter growth in constant currency terms.

Major Deals and Partnerships

• Secured a €550.00 million deal with Scandinavian insurer Tryg for AI-powered IT operations management
• Extended partnership with ALDI SOUTH for IT infrastructure modernization
• Collaborated with Weatherford International for enhancing operational efficiencies using AI solutions

Dividend Declaration

The Board of Directors has declared a second interim dividend of ₹11.00 per equity share.

Outlook

Despite global macroeconomic headwinds, TCS remains focused on its AI transformation strategy. The company's investments in AI capabilities, infrastructure, and strategic acquisitions position it well for future growth in the evolving technology landscape.

Aarthi Subramanian, Chief Operating Officer, stated, "Our customer engagements are focused on rapid value realization to deliver speed, efficiency and growth. TCS' AI Hackathon set a new benchmark – is the largest, most diverse and innovative AI-first culture building initiative."

As TCS navigates the changing tech environment, its strong financial performance and strategic AI initiatives demonstrate its commitment to maintaining its leadership position in the global IT services market.

Tata Consultancy Services (TCS), India's largest IT services company, has reported robust financial results for the second quarter, showcasing strong growth across all sectors and improved profitability. Additionally, the company has announced significant expansions into AI infrastructure development, completed a major acquisition, and provided updates on cybersecurity, data center plans, and workforce reduction.

Record-Breaking Order Book and Strong Deal Pipeline

TCS achieved a significant milestone this quarter, securing a $10 billion order book, demonstrating the company's continued ability to win large deals and maintain its competitive edge in the global IT services market. A TCS executive reported strong momentum in the company's deal pipeline, further reinforcing the positive outlook.

Financial Highlights

For Q2, TCS reported:

The company's EBIT (Earnings Before Interest and Taxes) for Q2 stood at ₹16,336.00 crore, up from ₹15,465.00 crore in the previous quarter, surpassing market estimates of ₹16,103.00 crore. This represents a significant improvement in profitability.

Margin Expansion

TCS demonstrated strong operational efficiency, with its EBIT margin expanding to 24.83% from 24.15% quarter-on-quarter. This 68 basis points improvement exceeded analyst expectations of 24.7%, highlighting the company's ability to enhance profitability amid challenging market conditions.

Sector-wise Performance

The company reported broad-based growth across all verticals:

• Banking, Financial Services, and Insurance (BFSI): 1.1% QoQ growth in constant currency
• Technology & Services: 1.8% QoQ growth in constant currency
• Life Sciences and Healthcare: 3.4% QoQ growth in constant currency
• Manufacturing: 1.6% QoQ growth in constant currency
• Communications, Media, and Information: 0.8% QoQ growth in constant currency

Strategic Initiatives

TCS continues to focus on digital transformation and AI-led services, positioning itself as a key player in helping clients navigate the rapidly evolving technology landscape. The strong order book reflects the trust global enterprises place in TCS's capabilities to drive their growth and transformation agendas.

New AI Data Center Subsidiary

TCS has received approval to establish a fully owned subsidiary in India. This new entity will focus on creating multiple AI and sovereign data centers for infrastructure and technology services. This initiative represents TCS's strategic expansion into AI infrastructure development within the domestic market.

Acquisition Update

TCS has completed the acquisition of Listening Midco, with the final purchase price reaching $72.8 million. This acquisition is expected to strengthen TCS's capabilities and market position.

Cybersecurity and Data Center Expansion

TCS executives have confirmed that the company's systems remained unaffected by recent cyberattacks, and other customers experienced no impact. This reassurance underscores TCS's robust cybersecurity measures.

A TCS executive outlined plans for data center expansion, aiming to achieve 1GW data center capacity within the next 5-7 years. To support this growth, TCS is actively seeking equity partners for the expansion.

Data Centre Unit Strategy

TCS announced that its data centre unit will primarily target hyperscalers and governments as key customers. A company executive indicated that the unit will require 18-24 months before it begins generating revenue.

Workforce Reduction Update

A TCS executive has confirmed that the company has implemented only 1% of its planned 2% layoffs. The technology services company had announced plans to reduce its workforce by 2%, but execution remains in early stages with just half of the intended reduction completed so far.

Jaguar Land Rover Systems Update

A TCS executive reported that Jaguar Land Rover (JLR) systems are now operational. Projects that were delayed due to an incident are expected to begin soon. This update indicates a resolution to previous issues and a return to normal operations for JLR-related projects.

Outlook and Future Challenges

While TCS maintains a robust order book and improving profit margins, the company faces some challenges ahead. A TCS executive warned that restructuring costs will continue for the next two quarters, potentially impacting short-term profitability. However, the company anticipates improved growth in the second half of FY26, while noting no significant shift in overall demand conditions.

With the new AI data center initiative, strategic acquisitions, and investments in cutting-edge technologies, TCS appears well-positioned to capitalize on the growing demand for digital, cloud, and AI services. The company's ability to win large deals, improve operational efficiency, and invest in emerging technologies bodes well for its future growth prospects in the competitive global IT services market.