TCS - Tata Consultancy Services Ltd. Share Price

In the earnings conference call for the quarter ending September 30, 2025, Tata Consultancy Services (TCS) outlined a positive outlook amid ongoing macro challenges. Key highlights include:

1. Performance Metrics:

   • TCS reported revenue of Rs.65,799 crore, marking a 3.7% sequential increase and a 2.4% year-on-year growth. In constant currency, revenue grew by 0.8% sequentially.
   • Operating margin stood at 25.2%, with a net margin of 19.6%. The earnings per share (EPS) rose by 8.4% year-on-year.

2. Total Contract Value (TCV):

   • TCV reached $10 billion, with the BFSI sector contributing $3.2 billion and the Consumer Business Group adding $1.8 billion. Notably, North America accounted for $4.3 billion in TCV.

3. Future Growth:

   • Management anticipates that FY26 international revenue growth will exceed the previous fiscal year, supported by robust client conversations and a strong demand pipeline.
   • The company indicated that IT services spending remains steady, though clients are tightening discretionary budgets. TCS is focusing on vendor consolidation for transformation objectives, leveraging AI solutions to succeed in large engagements.

4. AI Transformation Strategy:

   • TCS aims to become the world's largest AI-led technology services company, investing in five strategic pillars, including internal AI transformation (tcsAI), collaborative "˜Human + AI' services, and building an AI ecosystem.
   • The company has reported 160,000 employees with higher-order AI skills and significant interest in making AI real for clients through immersive programs and hands-on experiences.

5. Investment Plans:

   • TCS announced plans for a 1-gigawatt sovereign AI data center, with an estimated investment of $6.5 billion over 5-7 years, targeting hyperscalers and Indian enterprises for its offerings.

Overall, TCS established a solid foundation for sustained growth, emphasizing innovation through AI while maintaining strong financial discipline.

1. Question: "Can you provide a little more clarity on the capex required for the 1 gigawatt data center investment?" Answer: "We expect to achieve 1 gigawatt over five to seven years, with each 150-megawatt phase requiring roughly $1 billion. The investment will be a mix of equity and debt, and we plan to involve financial partners for equity. The sovereign cloud will be established in India, meaning all data and compute remain within the country."

2. Question: "On the growth, you mentioned that macro uncertainties are key. What assurances can you provide about future growth?" Answer: "While macros haven't significantly changed, our deep client engagements and AI solutions boost our confidence in sustaining or improving growth momentum. We saw better performance compared to Q1, and our fundamentals support a positive outlook."

3. Question: "Do you have partnerships for the data center investment, and what revenue metrics are you anticipating?" Answer: "We're in discussions with various finance partners and potential customers, which include hyperscalers and government entities. It's early to provide specific metrics, as we've just set up the subsidiary, but we anticipate revenue will kick in within 18 to 24 months."

4. Question: "Is the cybersecurity incident resolved, and how will that affect ongoing projects?" Answer: "Yes, the recovery process is completed, and all systems are operational. Projects that were paused due to the incident are resuming, and we expect to see them pick up in the coming weeks."

5. Question: "Can you clarify the expected revenue growth for FY26?" Answer: "In constant currency terms, we expect FY26 international revenue growth to outperform the 70-basis point growth of FY25. We remain optimistic about sustaining growth momentum across various market segments based on current trends."