For Tata Consultancy Services (TCS), India’s largest information technology (IT) services company, the second quarter of financial year 2026-27 (Q2FY27) was about maintaining steady growth amid global uncertainty and artificial intelligence (AI)-led disruptions. The company’s Q2 performance beat Bloomberg analyst estimates, even though the pace of growth remained modest.
TCS reported a net profit of ₹13,884 crore for Q2FY27, up 14.9 per cent year-on-year (Y-o-Y) from ₹12,075 crore in Q2FY26. Revenue for the company grew 11.2 per cent in reported terms at ₹73,188 crore for Q2FY27 compared to ₹65,799 crore a year ago.
On a quarter-on-quarter (Q-o-Q) basis, net profit was up 4 per cent. Sequentially, the firm’s revenue was up 1.3 per cent. In constant currency, revenue was up marginally by 0.5 per cent.
The company’s performance beat Bloomberg estimates on revenue growth and profit. According to Bloomberg estimates, revenue was expected at ₹73,108 crore and net profit at ₹13,786 crore.
PBIDT: Profit before interest, depreciation, and taxation; PBT: Profit
before tax; *Attributable to shareholders of the company
Source: Company; Compiled by Business Standard Research Bureau
On the analyst call after the result, he said: “The demand environment has not materially changed since last quarter, and discretionary programmes without near-term value remain understudied. Against this backdrop, our primary opportunity and focus are on translating the advances in AI into measurable enterprise advantage for our trends.”
Even as the company met analyst estimates, a closer look shows that the performance is yet to materially change.
This also means that the company will now have to score in H2FY27, which is considered to comprise soft quarters due to lesser working days.
“TCS’ Q2FY27 performance is best characterised as a modest result. Key positives include continued growth in technology and manufacturing, resilience in BFSI, and improving AI-related revenue. However, weak large-deal momentum, subdued North American growth, a decline in India, limited first-half growth, and sliding productivity metrics continue to constrain the outlook. At its current trajectory, TCS appears more likely to deliver around 1.5 per cent to 2 per cent growth for the full year than meaningful acceleration,” said Gaurav Vasu, founder and CEO, UnearthInsight.
The silver lining in all this is the company’s performance in AI-led revenue. Annualised AI revenue was $3.1 billion, which crosses the 10 per cent share of the overall revenue. In Q1FY27, TCS’ annualised AI revenue came in at $2.6 billion, up 13.6 per cent Q-o-Q.
Aarthi Subramanian, executive director – president and chief operating officer of TCS, said: “The biggest opportunity in front of us is in helping clients translate advancements in AI into business outcomes. Clients are keen to invest the productivity benefits from AI into enterprise transformation initiatives that will make their organisations future-ready. TCS is benefiting from this shift as evidenced by our growing AI revenues that crossed $3 billion on an annualised basis this quarter.”
The total contract value (TCV) for Q2FY27 was at $9.6 billion. For Q1, it was at $9.5 billion. TCS had signed deals worth $10 billion in Q2FY26.
During Q2FY27, the company announced two large engagements — one, the five-year strategic partnership with Porsche AG, and acquisition of the carmaker’s management and IT consulting subsidiary MHP; and two, the acquisition of Best Buy’s global capability centre (GCC) to transform it into an AI capability centre.
TCS reported Ebit (earnings before interest and taxes) margins at 24 per cent for Q2FY27. This was similar to Q1FY27. However, the company’s margins showed that it was not able to take the benefit of a depreciating rupee.
Samir Seksaria, chief financial officer (CFO) of TCS, maintained that the company aspires to be in the 26-28 per cent range. However, he also said that in the near term, the company would prioritise investments for growth.
“Our disciplined approach to margin management remains unchanged. As growth improves, we expect to benefit from enhanced scalar efficiency, while continuing to optimise our cost structures, align capacity with demand, and maintain our disciplined execution. All this while prioritising investments,” he added.
The margin performance is bothering analysts. “We had expected some margin expansion this quarter, but the gains appear to have been offset by higher spending on external consultants (6.8 per cent of revenue versus 5.9 per cent in Q1FY27) and increased project and software-related costs (3.6 per cent versus 3.3 per cent). The lack of operating leverage despite favourable currency movements suggests that underlying pricing pressure may be stronger than anticipated, with management seemingly reinvesting a large part of the currency benefit back into delivery and execution. This reinforces our view that margins are likely to remain largely range-bound in the 24-25 per cent band over the near term,” said Manav Medewala, research analyst, Mirae Asset Sharekhan.
In terms of verticals, the company saw growth across segments. Banking, financial services, and insurance (BFSI), which is the largest revenue contributor, grew 3.9 per cent Y-o-Y and 2.5 per cent sequentially. Manufacturing and Technology & Services grew 3.1 per cent each on a Q-o-Q basis. Consumer business was down 0.7 per cent sequentially, energy, resources & utilities was down 0.5 per cent.
The US, which is the largest geography for the company in terms of revenue contribution, grew 1.5 per cent Y-o-Y, and was flat on a Q-o-Q basis at 0.4 per cent. Latin America was up 4.3 per cent Q-o-Q and 1.7 per cent Y-o-Y. Continental Europe was up 3.3 per cent Y-o-Y and 0.3 per cent Q-o-Q. The UK, however, was up by 4.5 per cent Y-o-Y.
Headcount addition
With the company seeing demand environment moving positively, it is ramping up its people addition. During the quarter, TCS onboarded 10,000 freshers. The total headcount at the end of June 30, 2026 was 598,056, an addition of 4,258 employees. Attrition for the quarter came in at 13.3 per cent.
In Q1FY27, the company had onboarded 14,000 freshers. “We are hiring for demand, and we will definitely see good demand for these technologies, so we will continue to hire,” said Sudeep Kunnumal, chief HR officer, during the analysts call.
Meanwhile, the company said that it continues to build a future-ready workforce through upskilling its employees and hiring top talent. Investments in learning and critical skills drove a 17 per cent sequential increase in learning hours to 17.1 million.
