TCS Says AI Now Contributes $1.5 Billion in Annual Revenue

Tata Consultancy Services Ltd (TCS) on Wednesday, 17 December, said artificial intelligence now contributes about $1.5 billion in annualized revenue, marking the first time India’s largest IT services firm has publicly quantified AI income as it seeks to offset slowing growth in traditional outsourcing.

The disclosure was made by chief executive K. Krithivasan at the company’s annual investor day, where he said TCS has delivered more than 5,500 AI-related projects to date.

Krithivasan positioned AI within a broader $11 billion annualized revenue pool drawn from what the company classifies as non-traditional or “new-age” services, excluding legacy application development and maintenance, testing, and business process outsourcing.

“If you take application development and maintenance, testing and business process services out, the non-traditional or the new-age services constitute almost $11 billion of our revenue,” Krithivasan said, adding that these segments are growing faster than TCS’s overall average.

The disclosure comes as global IT services firms face pressure from slower enterprise spending, fewer large outsourcing deals, and client consolidation, even as they race to demonstrate that investments in generative AI can translate into incremental revenue rather than cost displacement.

TCS did not specify how it defines AI-related revenue, including whether it includes productivity tools, embedded AI components within broader contracts, or standalone AI-led transformation work. The absence of standardized definitions has made AI revenue disclosures difficult to compare across the sector, analysts have noted.

Krithivasan sought to counter concerns that generative AI could cannibalize outsourcing demand, arguing that earlier technology cycles ultimately expanded client spending rather than shrinking it.

“Each new technology cycle pushes technology deeper into the heart of business, driving higher spending as its value rises,” he said. Referring to generative AI, he added that its impact would be broader and faster than earlier technology transitions.

Despite the emphasis on AI-led growth, TCS continues to face structural headwinds. Full-year revenue growth has remained below 5% for two consecutive years, weighed down by muted discretionary spending and the loss of several large contracts.

The company has ceded deals worth more than $500 million to rivals, including contracts with Zurich Life Insurance, Phoenix Group, and the UK’s National Health Service, according to media reports.

TCS recently secured a $1 billion contract with the UK arm of Telefónica, offering some relief on the deal pipeline, though management has cautioned that deal cycles remain elongated.

The company has also shifted toward more aggressive capital deployment after years of relative restraint. In October, TCS said it would invest $6.5 billion over six years to develop one gigawatt of data center capacity, and in November it agreed with private equity firm TPG to jointly invest $1 billion in a data center project in Navi Mumbai.

It has stepped up acquisitions as well, including the purchase of digital marketing firm ListEngage MidCo for about $73 million and Salesforce consultancy Coastal Cloud for $700 million.

For the year ended March 2025, TCS reported revenue of $30.18 billion and an operating margin of 24.3%, below its stated long-term target range of 26–28%. Management reiterated that margin band even as it accelerates spending on AI infrastructure and specialized talent.

In July, TCS also announced plans to reduce its workforce by about 2%, or roughly 12,000 employees, as it reshapes its delivery model around automation and AI-enabled services.