TCS AI Revenue Reaches $3.1B; Constant Currency Up 0.5%

Tata Consultancy Services (TCS) closed the quarter from July to September, the second of fiscal year 2027, with revenue of 73,188 crore rupees, up 11.2% from the same period in 2025, according to results announced on Thursday (8). The annual figure masks a slowdown: in constant currency, revenue rose 0.5% over the quarter ending in June. In rupees, the sequential increase was 1.3%.

Operating margin stood at 24%, virtually stable. The total value of closed contracts (TCV) reached $9.6 billion, slightly above the $9.5 billion from the first fiscal quarter and below the $10 billion recorded a year earlier. The company ended September with 598,056 employees, 4,258 more than in June, and the twelve-month attrition rate fell from 13.6% to 13.3%.

AI Revenue Surpasses 10% of Total

What TCS chose to highlight is another figure. Annualized artificial intelligence revenue reached $3.1 billion, according to the company, up from $2.6 billion at the end of June. This represents a jump of about 19% in three months, and the AI line has surpassed the 10% mark of total revenue.

The comparison between the two curves is the central point of the report. An AI line growing nearly 19% in a quarter coexists with consolidated revenue that, in constant currency, has remained nearly stagnant. One hypothesis that the disclosed numbers do not allow us to dismiss is that part of what is now classified as AI replaces maintenance, testing, and development contracts that TCS was already billing, rather than adding to them. The company does not disclose how much of the AI revenue comes from new scope versus how much comes from restructured existing accounts.

CEO K. Krithivasan preferred to emphasize the breadth: "We are pleased with the widespread growth across all our international markets and most segments," he said in the statement. The caveat lies in the word "international." The domestic Indian market contracted in the quarter, according to the earnings coverage.

Buying Clients for Growth

Krithivasan described two agreements from the period as "a new category of transformation partnerships." The first is the acquisition of MHP, a management and IT consultancy from Porsche based in Ludwigsburg, for an enterprise value of €320 million, tied to a commitment from the automaker of €1.25 billion over five years with TCS and MHP. The operation still requires approval from the European Commission.

The second is the transfer to TCS of the Global Capability Center (GCC) that the American retailer Best Buy maintained in India. TCS states that it will convert it into an "AI Capability Center."

Both arrangements follow the same logic: TCS assumes a structure that the client operated independently and receives in return a multi-year contract. It represents bought, rather than organic, growth and is likely to show up earlier in TCV than in quarterly revenue, which in the case of MHP only begins to count after the closing.

Where the Effect Reaches

In Germany, the acquisition of MHP places TCS within the automotive chain with a local brand and clients beyond Porsche. For European competitors such as Capgemini and mid-sized German consultancies, the message is that an automaker may replace an internal IT arm with a long-term contract with an Indian provider, without losing the household name.

In the United States, the Best Buy case impacts a model that has grown precisely as an alternative to integrators: the captive center in India. American retailers, banks, and insurers have set up GCCs to retain control and intellectual property. If TCS can convince one of these owners to return the operation in the name of AI, other parent companies will do the same calculation, and the GCC market may also become an acquisitions market.

In India, the effect is on employment. Employees of a captive center become employees of a vendor, with a different salary policy and exposure to productivity targets. For Hyderabad, Bengaluru, or Pune, where American companies’ GCCs are concentrated, each transfer of this kind changes the employer of entire teams of engineers without the position changing cities.

The next test comes when Wipro, on the 15th, and Infosys, later in October, release their numbers and show whether the gap between the AI line and total revenue is a sector trait or a particularity of TCS.