New Delhi, Jan. 12 -- Tata Consultancy Services (TCS), India's largest software services exporter, posted stronger-than-expected revenue growth in the December quarter, driven by rising demand for artificial intelligence-led technology spending, even as clients remained cautious in a seasonally weak period.
The Mumbai-based IT major reported consolidated revenue of Rs.67,087 crore for the third quarter ended December 31, up 4.9% year-on-year, beating analysts' estimates of Rs.66,676 crore, according to LSEG data. Growth came despite the traditional year-end slowdown, when global clients typically scale back discretionary spending.
AI-led transformation deals emerged as a key growth lever for the Tata Group firm. At its investor day last month, TCS announced that its AI business had reached an annualised revenue run rate of $1.5 billion, accounting for nearly 5% of overall revenue. In its Q3 statement, the company revised this figure upward, saying AI services now generate $1.8 billion in annualised revenue.
The company has been embedding generative AI, automation and cloud-native solutions across client engagements, positioning AI not as a standalone offering but as a horizontal capability cutting across industries. Management said demand was strongest in areas such as intelligent operations, AI-powered customer experience platforms, software engineering productivity and data modernisation.
However, profitability came under pressure. Net profit fell 14% year-on-year to Rs.10,657 crore, missing analysts' expectations of Rs.13,024 crore. TCS attributed the decline largely to restructuring costs linked to workforce rationalisation announced in 2025, as the company reorients its talent base towards AI and digital skills.
Deal momentum remained healthy, though slightly softer sequentially. The company's total contract value (TCV) for the quarter stood at $9.3 billion, down from $10 billion in the previous quarter and $10.2 billion a year earlier. Still, TCS announced eight large deals during the quarter-the highest among India's top five IT services firms-underscoring continued client confidence.
Notable wins included engagements with British food retailer Morrisons and Danish telecom operator Telenor, where TCS is expected to deploy AI-driven analytics, automation and digital platforms to support business transformation.
Industry analysts said TCS's performance reflects a broader trend in the IT services sector, where AI-led projects are offsetting weakness in traditional application development and maintenance work. While clients remain cautious on discretionary tech spending, investments tied to productivity, cost optimisation and AI adoption continue to move ahead.
Looking ahead, TCS is expected to double down on scaling its AI capabilities, expanding partnerships with hyperscalers and embedding generative AI across its service lines. The company has said it sees AI as a multi-year opportunity, with enterprise adoption still in its early stages despite rapid experimentation over the past year.
Published by HT Digital Content Services with permission from TechCircle.