• Broad-based growth: TCS reported its fifth consecutive quarter of growth, with international revenue up 1.2%; every service line and every vertical except consumer business and ER&D grew.
• Spending priorities: Management said overall customer budgets were flat, but spending is shifting toward AI-enabled efficiency, core-system modernization, and business outcomes. Customers are pursuing these programs selectively, and management said it sees no significant overall budget increase or decrease.
• AI momentum: AI revenue was $3.1 billion, almost 10% of revenue, with AI revenue growing in every industry segment. Management said AI projects are often shorter-cycle and require continued deal wins, while AI is increasingly part of renewals and transformations.
• Margin investments: Margins were 24% as TCS invested in partnerships and M&A, niche talent, capacity, and subcontractors; subcontractor costs were approximately 100 basis points and more, while currency contributed 10 basis points. Management said acquisition-related dilution may weigh on margins as deals complete.
• FY27 outlook: Management expects FY27 to be much better than FY26 and said it is more optimistic than last quarter. TCV was $9.6 billion, excluding Porsche and Best Buy until regulatory approval, which was expected around Q3.