Tata Consultancy Services has demonstrated strong momentum in artificial intelligence, reporting significant growth in AI-focused revenue as the company positions 2025 as a transformative year for AI adoption across the industry. The Indian IT major's leadership highlighted the shift from AI experimentation to tangible deployment and production-ready solutions.

AI Revenue Performance Shows Strong Growth

The company's AI-focused business has shown impressive growth trajectory, with key performance metrics demonstrating accelerating client adoption:

TCS President and COO Aarthi Subramanian emphasized this rapid acceleration in AI demand, noting that the experimentation phase of 2023 and 2024 has paved the way for tangible AI deployment. "I think 2025 saw real adoption happening. AI projects getting into production and value coming out of it," Subramanian stated.

Leadership Perspective on AI Market Evolution

CEO K Krithivasan provided insights into the company's strategic approach to artificial intelligence, stating, "We never looked at AI as a headwind at all." The leadership noted that client spending patterns have evolved toward short turnaround projects where AI integration offers immediate returns on investment.

Subramanian outlined how client conversations have evolved into two distinct streams:

• Getting Ready for AI: Foundation spending on cloud, data, and cybersecurity infrastructure
• Leading with AI: Strategic investments to create specific business differentiation

Workforce Transformation and Capability Building

TCS has undertaken significant workforce retooling to meet growing AI demand. The company has dramatically expanded its pool of employees with higher-order AI skills, growing from 80,000 to 217,000 employees. This substantial investment in human capital reflects the company's commitment to meeting accelerating client requirements.

Subramanian highlighted the changing nature of client engagements, noting increased focus on speed and rapid delivery. "The number of projects that we have delivered using rapid build methodology has increased significantly this quarter," she explained.

Market Positioning and Client Engagement

The company is witnessing a fundamental shift in how clients approach AI initiatives. Client conversations now center on identifying high-impact AI projects and building rapidly with AI technologies. This evolution reflects the broader industry transition from experimental AI projects to production-ready solutions that deliver measurable business value.

TCS's strong performance in AI revenue growth and workforce development positions the company to capitalize on the continued expansion of AI adoption across industries, as clients increasingly prioritize speed and immediate returns on their AI investments.

Tata Consultancy Services shares declined in early trading on Tuesday following the company's Q3 FY26 results announcement, as investors assessed mixed financial performance against a backdrop of cautious brokerage sentiment.

Stock Performance and Market Reaction

TCS stock opened lower at ₹3,220.40, representing a 0.6% decline from the previous close. This movement reversed part of the 1.1% gain recorded in the previous session ahead of the earnings announcement. The decline occurred despite marginally positive broader market sentiment, with benchmark indices Sensex and Nifty trading higher in early deals.

Q3 FY26 Financial Results

The company's Q3 FY26 results presented a mixed picture, with headline numbers impacted by significant exceptional items:

The reported net profit decline was primarily attributed to hefty exceptional charges linked to restructuring activities, statutory impacts from new labour codes, and legal provisions. When these one-time items are excluded, the underlying operational performance showed resilience with 8.5% profit growth.

Brokerage Sentiment and Outlook

Most brokerages adopted a cautious stance following the results, with several key concerns emerging:

• Muted international growth trends affecting overall revenue momentum
• Modest deal momentum with limited evidence of acceleration
• Weak forward indicators including deal conversion rates and headcount trends
• Limited visibility on sustained growth recovery in the near term

The majority of analysts maintained neutral or hold ratings on the stock. Citi remained bearish in its assessment, while CLSA stood out as the only brokerage with a clearly constructive view, highlighting stable margins, sharp rise in AI-led revenue, and management confidence in stronger growth prospects.

Market Context and Performance

TCS shares have faced significant pressure over the past year, declining over 24% during this period. The current weakness reflects ongoing investor concerns about the company's ability to demonstrate meaningful improvement in demand momentum and deal activity. Despite delivering what analysts characterized as an in-line operational quarter with stable margins, the absence of clear acceleration in demand has kept market expectations subdued.

Investors remain focused on whether the company can achieve sustained improvement in international business performance and overall deal conversion rates in upcoming quarters to support a potential re-rating of the stock.