TCS Q1 Highlights: Revenue Declines, Profit Beats; AI Momentum Builds, Outlook Cautiously Optimistic

Tata Consultancy Services reported a mixed set of numbers for the first quarter of FY26, as global uncertainty and deal delays weighed on revenue.

While topline growth was muted, profits came in above expectations, and the company remains optimistic about a stronger fiscal year 2026, especially in international markets. AI-led services are gaining traction, and the company continues to invest in capacity and long-term growth.

• Revenue down 1.6% at Rs 63,437 crore versus Rs 64,479 crore. (Bloomberg estimate: Rs 64,636.4 crore)

• EBIT down by 0.5% at Rs 15,514 crore versus Rs 15,601 crore. (Estimate: Rs 15,690 crore)

• EBIT margin at 24.45% versus 24.2% (Estimate: 24.27%)

• Net profit up 4.38% at Rs 12,760 crore versus Rs 12,224 crore (Estimate: Rs 12,263.3 crore)

Total contract value for the June quarter stood at $9.4 billion, down from $12.2 billion in March quarter, but higher than $8.3 billion in Q1 FY25.

TCS management said the $7–$9 billion TCV range is sustainable, and the company replenished all deals closed in the quarter.

North America remains a key market, though some deals saw ramp-downs or pauses. Deal decision delays may spill into Q2, but recovery is expected in the months ahead.

Revenue from AI has started to come in, with clients moving from pilots to full-scale implementation. There is strong demand for domain-specific AI, especially in modernisation and business process transformation.

TCS is building its own agentic AI capabilities in-house, targeting value chain automation and industry-specific use cases. Importantly, AI adoption will not lead to headcount cuts. Instead, TCS plans to reskill and redeploy employees.

Net headcount addition stood at 5,090 employees during the quarter, whereas attrition ticked up slightly to 13.8% from 13.3% in the previous quarter.

Much of the hiring was done in advance, in anticipation of growth that didn’t materialise in Q1. The company acknowledged excess capacity, but said the focus will now shift to improving productivity.

Enterprise solutions, cost optimisation, and cybersecurity remain top client priorities.

TCS sees good traction in AI, cloud, and cyber services, and expects these areas to lead growth going forward.

CEO K Krithivasan said the company remains unsure when growth will fully resume, but is hopeful that clarity post-July once the new US trade bill is enacted and could ease client uncertainty.

TCS remains bullish on international markets, with FY26 expected to outperform FY25 in constant currency terms.

Margins are expected to improve as the company focuses to improves utilisation of its current workforce.

TCS’s Q1 FY26 results reflect a challenging demand environment, with muted growth, deal delays, and cautious client spending.

However, strong profitability, a solid deal pipeline, and early AI traction provide some comfort. The next few months especially with evolving US policy will be critical in determining whether growth momentum can return.