TCS CEO sees AI reaching 20% of revenue within 6 quarters

Tata Consultancy Services expects artificial intelligence to generate about 20% of its revenue within four to six quarters, up from 8.5% today, as enterprises accelerate adoption of AI-led transformation programs.

"AI is becoming a bigger part of every conversation we have with clients," Chief Executive Officer K. Krithivasan said in an interview. "We see this reaching roughly 20% of our revenue in the next four to six quarters."

TCS reported annualized AI services revenue of $2.6 billion in the fiscal first quarter ended June 30, up 13.6% from the prior quarter. The company added $75 million in incremental AI revenue during the period, down from $125 million in the March quarter. Krithivasan attributed the lumpiness to the short-duration nature of AI projects, which often span one or two quarters rather than generating recurring annuity revenue. Total contract value reached $9.5 billion, including an $800 million AI-led transformation deal with Swedish bearing manufacturer SKF.

The forecast carries implications for the broader IT services sector, where companies are racing to retool workforces and build AI capabilities. TCS, which employs 593,798 people and added 9,279 workers in the quarter, pushed back against the narrative that AI will eliminate white-collar jobs. "We do not believe there will be a drastic reduction in employment," Krithivasan said. "People will be doing different things — prompt engineering, model training, testing, lifecycle management."

How TCS Plans to Get There

The company's AI revenue currently runs at an annualized $2.6 billion, representing about 8.5% of total revenue of roughly $30.5 billion. Reaching 20% would require more than doubling that figure to about $6 billion within 18 months, implying sustained quarterly growth of 10% to 15%. The path depends on converting a pipeline that includes six mega deals signed over the past five quarters, each with an AI transformation component.

TCS has expanded its AI ecosystem through partnerships with Anthropic, where it secured early access to the Claude family of models and 50,000 licenses, and Mistral AI, where it became the first global systems integrator partner. The company also launched a SovereignSecure Cloud for Europe and a dedicated global value and innovation center business unit to help enterprises build AI-ready global capability centers.

The Jobs Question

Krithivasan's view on employment contrasts with a prevailing industry narrative that AI will reduce headcount in software development and IT services. TCS's own hiring data tells a more nuanced story: the company added 9,279 employees in the quarter, its highest net addition in nearly four years, while onboarding 14,000 campus graduates. Voluntary attrition improved to 13.6% from 14.5% a year earlier.

Chief Operating Officer Aarthi Subramanian said clients are increasingly adopting outcome-based pricing models for AI programs, particularly in agentic business process services. TCS deployed seven AI agents for a global specialist insurer's worker compensation workflow, cutting claims settlement time by 40% through a human-plus-AI operating model. For a large retailer, 70 agents now orchestrate IT operations across more than 60 infrastructure and application workflows, resulting in 30% faster remediation and 80% fewer incidents.

Investor Implications

TCS shares traded at 2,049.5 rupees, down 0.39% on the day, near the lower end of their 52-week range. The stock trades at a discount to its 52-week high of 3,399 rupees, reflecting market caution about margin pressure and uneven sector demand. Operating margin fell to 24% from 25.3% in the prior quarter, primarily due to annual wage hikes that cost 170 basis points. Chief Financial Officer Samir Seksaria said the company aims to exit at margins above 25% over time.

The AI revenue forecast, if realized, would represent a structural shift for a company where traditional application development and maintenance still account for the bulk of revenue. Infosys and Wipro, TCS's closest Indian competitors, are pursuing similar AI strategies but have not disclosed comparable revenue targets. Among global peers, Accenture reported $3 billion in generative AI bookings in its fiscal second quarter, while TCS's $2.6 billion annualized AI run rate places it among the largest AI services providers by disclosed revenue.

This article is for informational purposes only and does not constitute investment advice.