TCS Meets Estimate After Deal Momentum Boosts Recovery

Tata Consultancy Services Ltd. reported quarterly earnings that met analysts’ estimates after a string of cost-cutting efforts and data center deals helped Asia’s largest outsourcer weather a slump in the sector.

Net income rose 4.6% to 133.5 billion rupees ($1.4 billion) in the June quarter, the company said in a statement Thursday, meeting the average analyst estimate of 134.5 billion rupees. Sales rose 14% to 722.75 billion rupees, helped by a decline in the Indian rupee versus the dollar and the euro.

TCS and other Indian IT services exporters such as Infosys Ltd. are limiting spending and curbing headcount as demand for major software projects declines. Corporate customers, especially in the crucial US market, are delaying large tech outlays at a time of elevated interest rates, uncertainty around President Donald Trump’s tariffs and military conflict in the Middle East.

The AI boom poses a major threat to India’s $280 billion software services industry, which has thrived for decades on labor arbitrage and transformed the country into the world’s back office. With AI tools from OpenAI and Anthropic PBC already driving clients away, TCS’s past formula for success — hiring armies of graduates to write code for clients such as Apple Inc., Boeing Co. and Bank of America Corp. — appears to have been upended.

Shares of TCS have lost more than 35% this year as investors have assessed its strategy to deal with the geopolitical challenges as well as competition from AI services.

In the face of a sector-wide slump brought on by growing demand for AI, the company has vowed a massive cost-cutting campaign. Natarajan Chandrasekaran, chairman of TCS parent Tata Group, predicted last month that bots 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.

Read More: Tata Boss Predicts AI Agents Will Replace Half Its Tech Jobs

Mumbai-headquartered TCS is already pivoting to AI. It’s cut a deal with OpenAI to build data centers for artificial intelligence in India 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 racing to capitalize on the opportunity, its CEO K. Krithivasan told Bloomberg News in March.

Read More: TCS Is in ‘Advanced’ Talks for More AI Data Centers in India

What Bloomberg Intelligence SaysCommentary on AI momentum will be key, given the disruption fears attached to the entire sector, yet absent a recovery in discretionary IT spending, AI is unlikely to drive near-term sales growth.- Anurag Rana, analystClick here for research

TCS and its local rivals began by offering cheap backoffice 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 contenders direct rivals to global technology services providers from Accenture Plc to International Business Machines Corp.