TCS AI Revenue Reaches $3.1 Billion, Grows 15–20% Quarterly

Tata Consultancy Services (TCS) has reported strong growth in its artificial intelligence business, with annualised AI revenue reaching $3.1 billion and growing at a compound quarterly rate of 15–20% over the past four quarters. AI now contributes around 10% of the company’s total revenue, highlighting the growing importance of AI-led services in its business.

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The update came after TCS management met institutional investors in the US between October 22 and 26, 2026. TCS Chief Financial Officer Samir Seskaria and Head of Investor Relations Nehal Shah held discussions with investors in New York, Boston and Chicago.

Following these meetings, Japanese brokerage firm Nomura retained its ‘Buy’ rating on TCS shares, with a target price of ₹2,630.

Also Read: Cognizant Cuts Project Leap Restructuring Cost Estimate to $250 Million

The growth in AI revenue comes at a time when global technology companies are seeing changes in traditional IT services demand as clients increasingly seek productivity improvements through automation and artificial intelligence.

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AI Adoption Still at an Early Stage Across Enterprises

Despite the rapid growth in AI-related business, enterprise adoption remains at an early stage. According to TCS management’s assessment, only around 5% of enterprises are sufficiently mature to deploy advanced AI models at scale.

The remaining 95% continue to face challenges related to data quality, infrastructure readiness and the availability of AI-ready applications.

Banking, financial services and insurance (BFSI), along with technology companies, are among the early adopters of advanced AI solutions. Healthcare, life sciences, energy and telecommunications are relatively slower in adoption.

TCS sees opportunities in helping enterprises address these gaps through AI implementation, application modernisation and industry-specific solutions.

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Some of the key areas where the company sees demand include:

• Modernisation of legacy banking and financial systems using AI.
• Development of smaller, domain-specific language models.
• AI governance, including monitoring AI agents, security guardrails and identity management.
• Automation of enterprise processes and modernisation of existing applications.

AI Could Reduce Legacy System Modernisation Time

One of the significant opportunities identified by TCS is the modernisation of legacy banking systems, particularly those running on COBOL, a programming language widely used in older banking and financial applications.

Traditionally, modernising such systems can take three to four years. TCS management believes AI could reduce this timeline to between six and 18 months by helping technology teams analyse existing code, generate technical specifications and break applications into smaller modules.

The company also sees increasing demand for smaller, domain-specific language models. These models can offer lower operating costs, better accuracy for specific business tasks and reduced dependence on a single AI model provider.

AI governance is another emerging opportunity. As enterprises deploy more AI agents, they will require systems to monitor their activities, establish security controls and manage access and identities.

TCS Investing $1 Billion Annually in AI

TCS is investing around $1 billion annually in AI-related training, hiring and infrastructure.

According to management, margins in AI services are higher than those in traditional services. However, the benefits are currently being partly offset by investments required to build AI capabilities.

The company is also dealing with productivity-led pricing pressure in its traditional IT services business.

As clients demand efficiency improvements, technology service providers are increasingly expected to deliver more work with fewer resources. TCS has been providing productivity benefits to customers during contract renewals and vendor consolidation deals.

However, management expects this pressure to moderate. Its top 200 customers, which contribute approximately 80–85% of revenue, have largely completed one cycle of productivity improvements.

TCS recorded positive sequential net growth in every quarter between Q2 FY26 and Q2 FY27. Management expects the overall business impact to become more positive as productivity-related pricing pressure eases and new AI revenue increases.

The company also sees opportunities arising from a possible restructuring of global capability centres (GCCs) in India, particularly smaller captive centres with 500–2,000 employees that may face economic challenges over time.

Nomura Retains Buy Rating

Following its discussions with TCS management, Nomura retained its ‘Buy’ rating on the company’s shares with a target price of ₹2,630. The brokerage has valued TCS at 16 times its estimated FY28 earnings per share.

The assessment reflects the potential contribution of AI services, enterprise modernisation opportunities and the expected moderation in productivity-led pricing pressure.

For the IT services industry, TCS’s AI revenue growth also points to a gradual shift in business demand. While traditional technology services continue to face pricing and productivity challenges, AI implementation, governance and enterprise modernisation are emerging as important areas of business growth.