India’s largest IT services firm Tata Consultancy Services (TCS) ended FY26 with its first full-year revenue decline in dollar terms since listing, even as a modest fourth-quarter recovery signalled early signs of stabilisation.
The performance reflects a shifting demand environment, with macro uncertainty and the initial impact of artificial intelligence beginning to weigh on the company’s traditional growth model.
TCS reported a 0.5 percent decline in full-year revenue to $30.08 billion, while net profit rose 3.5 percent to $5.94 billion.
Fourth-quarter revenue rose 1.5 percent sequentially to $7.62 billion
In rupee terms, Q4 revenue increased 5.4 percent to ₹70,698 crore
Full-year revenue in rupees grew 4.6 percent to ₹2,67,021 crore
The annual decline was largely driven by weakness in its India business, where revenue fell sharply by 32 percent.
Operating margins improved by 70 basis points to 25 percent, supported by cost controls, productivity gains and workforce rationalisation.
Chief executive K Krithivasan said client engagement remains strong despite global uncertainties, including tensions in West Asia, and expressed confidence of a gradual recovery in FY27.
Chief financial officer Samir Seksaria attributed margin gains to better business mix, improved realisations and currency benefits.
TCS highlighted that while clients are keen to adopt AI, many are not yet ready in terms of infrastructure and data capabilities. The company is investing in modernising client systems and building scalable data foundations.
COO Aarthi Subramanian noted that a significant portion of technology spending is now directed towards these areas.
Industry experts say AI is reshaping the IT services model by compressing delivery timelines and reducing workforce intensity, even as deal wins remain strong.
TCS has struggled to grow beyond 5 percent in the past three years, trailing peers such as Infosys and HCL Technologies. Its shares have also underperformed, declining 19.28 percent on the BSE since January.
A key positive was the increase in large clients generating over $100 million annually, which rose to 66.
During the year, TCS:
Won a $1 billion, 10-year deal from Telefónica UK
Renewed its transformation deal with Marks & Spencer
Secured a major contract with a US-based healthcare and pharma firm
The company’s workforce fell by 23,460 to 584,519 employees, reflecting its largest layoff exercise last year. Severance costs totalled $157 million.
Despite this, TCS announced wage hikes for eligible employees, with top performers set to receive double-digit increases.
While near-term growth remains under pressure, TCS expects improving demand supported by strong deal pipelines and rising AI-led transformation spending.
The key challenge ahead will be balancing strong order wins with revenue conversion, as AI continues to reshape the economics of the IT services industry.
