Financial Performance Overview

Revenue Performance:

  • Q2 FY27 revenue: ₹73,188 crore
  • Sequential growth: 1.3% QoQ, 11.2% YoY
  • Dollar revenue: $7,642 million (20 bps QoQ growth, 2.4% YoY)
  • Constant currency growth: 0.5% QoQ, 2.8% YoY
  • International revenue growth: 1.2% sequential in constant currency

Market Performance:

  • United Kingdom: 3.5% sequential growth
  • North America: 0.4% sequential growth
  • Continental Europe: 0.4% sequential growth
  • India revenue: 6% growth (affected by project deferral)
  • Regional Markets: 3.6% YoY growth

Profitability Metrics:

  • Operating margin: 24% (stable sequentially)
  • Net margin: 19%
  • Cash conversion: 102.2% of net income
  • Funds invested: $5.98 billion

Vertical Performance (Constant Currency Sequential Growth):

  • BFSI: 2.5% growth (3.9% YoY)
  • Manufacturing: 3.1% growth (4.2% YoY)
  • Technology and Services: 3.1% growth (4.8% YoY)
  • Consumer Business: -0.7% growth (-1% YoY)
  • Life Sciences and Healthcare: 0.3% growth
  • Communications and Media: Broadly flat
  • Energy, Resources and Utilities: -0.5% growth

AI Business Performance

Key Metrics:

  • Annualized AI revenue: $3.1 billion (crossed 10% of overall revenue)
  • AI revenue growth: 19% in the quarter
  • AI recognized as structural growth opportunity

Demand Patterns:

1. AI-native solutions with business outcomes

2. AI-led transformation of enterprise systems

3. Autonomous GBS (Global Business Services)

Notable AI Deals and Initiatives:

  • Partnership with Porsche and proposed acquisition of MHP (subject to regulatory approvals)
  • Best Buy GCC engagement for AI-native global capability centers
  • Launch of TCS ADD AgentHub for drug discovery
  • Domain-specific agentic control planes
  • New Physical AI capabilities including Autonomous Engineering Lab powered by NVIDIA in Bengaluru
  • AI-first lights-out factory lab in Pune

Order Book and Business Development

Total Contract Value (TCV): $9.6 billion for the quarter (excluding Porsche and Best Buy deals)

Deal Quality: Demonstrates relevance in large, complex, and strategically important transformation programs

Win Rates: Improved during the quarter

Workforce and Talent Management

Headcount: 598,056 associates (net addition of ~13,000 over last two quarters)

Hiring Strategy:

  • Balanced approach: experienced talent, early career talent, and internal mobility
  • Focus on AI and domain expertise strengthening
  • 10,000 graduates onboarded globally this year
  • Campus hiring for next financial year in final stages

Learning & Development:

  • Learning hours: 17.1 million hours (17% QoQ increase)
  • Large-scale technology and AI capability expansion through reskilling

Attrition:

  • LTM attrition in IT services: 13.3% (30 bps sequential reduction)

Margin Management and Investments

Margin Philosophy: Prioritizing investments for long-term profitable growth while maintaining discipline

Current Investments Focus Areas:

1. Targeted capability acquisitions

2. Strengthening partnership ecosystem with Frontier AI companies, Hyperscalers, Semiconductor ecosystem, Tier-1 industrial suppliers, and enterprise software providers

3. Accelerating investments in high-growth service areas (sales, solutioning, service transformation, new offerings across five big bets with focus on AI and data)

4. Talent and capability creation at scale (learning & development, niche talent hiring)

5. Creating new growth engines (data center services, GCC offerings, mid-market segments, ServiceNow, Public Services, Sovereign Cloud)

Margin Headwinds:

  • Higher subcontractor expenses (meeting near-term skills and delivery requirements)
  • Higher bench investment (building future capacity)
  • Strategic partnership investments
  • M&A-related initiatives
  • Hiring of niche talent

Margin Mitigation: Partly offset by currency gains and operating leverage

Future Margin Outlook:

  • Long-term aspiration: 26%-28% operating margin
  • Near-term focus: Prioritizing investments for growth
  • Expected MHP acquisition dilution: ~50 bps (depending on timing)
  • Traditional levers: Productivity, utilization, subcontractor optimization

Capital Allocation

Policy: Unchanged - committed to returning substantial free cash flows to shareholders while judiciously investing to support long-term growth aspirations

DSO: 74 days (constant sequentially in dollar terms)

Operational Highlights

Cybersecurity Focus: Enterprises prioritizing cyber resilience and recovery, with frontier models changing vulnerability management

Salesforce Business: Combined strengths of Coastal Cloud, ListEngage, and TCS Salesforce practice driving significant growth; recognized as #1 Salesforce Services partner by leading analysts

Human+AI Service Autonomy Model: Good progress in deployment across client engagements; top ranking in Agentic AMS from customers

Data Center Services: Expansion plans; 18-24 months timeline for revenue contribution after contract wins

Demand Environment Assessment

Overall Sentiment: Environment remains selective and uneven; discretionary programs without near-term value under scrutiny

Primary Opportunity: Translating AI advances into measurable enterprise advantage for clients

Client Movement: Toward new phase of enterprise AI adoption - from isolated use cases to redesigned value chains, governed agentic systems, AI-ready infrastructure, and Human+AI operating models

Regional Market Volatility

India Specifics: Project deferral caused revenue decrease; no structural issues identified; projects expected to be reinstated in subsequent quarters

Client Metrics: One specific drop in $100M+ clients; another due to currency exchange movement affecting account at the cusp

Future Outlook

Growth Confidence: Medium-term confidence based on TCV, pipeline, and client conversations

Seasonality: Q3 furlough expected to be similar to previous years

Vertical Expectations:

  • North America: Expected to recover and become healthy soon
  • Consumer Business: Q3 seasonally important; medium-term growth improvement expected
  • ERU: Medium-term structural recovery expected

BSNL Deal: Expected to provide cushion for next couple of quarters, but regional markets will remain volatile due to lumpy delivery nature

Q&A Session Highlights

Subcontracting Increase: Across India and overseas to meet near-term demand-supply skill mismatches; partially linked to visa fee hike

Pricing Environment: Broadly stable; better pricing on AI revenues; some frontloading of productivity benefits

AI Revenue Margin: Higher than company average

Employee Costs: Lower performance-linked bonus outlay due to performance against internal targets

Cost Structure: Significant increase in fee to external consultants and project expenses reflecting incremental delivery costs and partnership investments