TCS Q1 FY26 Results: Weak Growth Despite AI Push

Muted Revenue Growth Amid Global Uncertainties

Tata Consultancy Services (TCS) reported a sluggish performance for Q1 FY26, with revenue at ₹63,437 crore, up just 1.3% year-on-year and down 3.1% in constant currency. Net income rose by 6% YoY to ₹12,760 crore, while operating margins saw a slight improvement to 24.5%. However, CEO K Krithivasan attributed the overall slow growth to “continued global macro-economic and geo-political uncertainties.”

AI Narrative Strong, But Real Impact Lacking

Artificial Intelligence continues to dominate TCS's strategic narrative. COO Aarthi Subramanian highlighted that “AI revenues have grown” and “agentic AI is becoming a part of all conversations.” However, the company did not disclose any major AI-led deal wins this quarter, raising questions about the tangible impact on its business. Total contract value also declined to $9.4 billion from $12.2 billion in the previous quarter.

Investments in AI Platforms and Employee Upskilling

TCS showcased AI-integrated platforms like “Sovereign Secure” and “DigiBOLT,” asserting that AI is now pervasive across offerings. Subramanian stated AI is driving “modernisation using SaaS platforms” and improving productivity in coding. Additionally, CHRO Milind Lakkad revealed over 114,000 employees now possess “higher-order AI skills,” although their contribution to revenue remains unclear.

Cost Optimisation and Strategic Shifts

The quarter saw a significant drop in equipment and software licence expenses—from ₹2,748 crore last quarter to just ₹726 crore—indicating TCS's move towards in-house AI tools to optimise costs. Meanwhile, global peers like Accenture are executing AI-led transformations worth $1.5 billion, highlighting TCS’s relatively conservative progress.

Shift Towards In-House AI Tools

Interestingly, TCS reported a sharp decline in equipment and software licence expenses from ₹2,748 crore last quarter to ₹726 crore, suggesting a pivot towards building in-house AI tools to drive cost efficiencies.

AI Upskilling Efforts Continue

Outgoing CHRO Milind Lakkad shared that over 114,000 employees now possess higher-order AI skills, although their direct business impact remains unclear.

Conclusion

TCS's Q1 FY26 results reflect persistent challenges amid economic uncertainties and deal delays. While the company continues to build its AI capabilities aggressively, the lack of substantial AI-led deal wins and falling contract value suggest a gap between narrative and tangible business impact. As Krithivasan noted, it remains “too early to call out when growth will resume.”