TCS Reports First Annual Revenue Decline Since IPO Amid Q4 Recovery

Tata Consultancy Services Reports Modest Recovery in Quarterly Growth, But Full-Year Revenue Declines

Tata Consultancy Services (TCS) closed FY26 with a modest recovery in quarterly growth, but not enough to offset a broader slowdown that pushed it into its first full-year revenue decline in dollar terms since listing. The results underscore a shifting demand environment, where macro uncertainty and the early impact of artificial intelligence (AI) are beginning to weigh on the IT services giant's traditional growth model, even as the company expects a gradual recovery in FY27.

In the fourth quarter, revenue grew 1.5% sequentially to $7.62 billion, indicating a mild pickup in momentum toward the end of the year. However, the company's full-year revenue declined 0.5% in dollar terms to $30.08 billion, alongside a 3.5% rise in net profit. The annual decline was driven by weakness in its India business, whose revenue fell 32% during the period.

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Much of the revenue trends differed due to currency movements. In rupee terms, revenue trends were more positive, with the fourth quarter revenues registering a 5.4% sequential rise to ₹70,698 crore and full-year revenue rising 4.6% to ₹2,67,021 crore.

The company's management struck an optimistic note on the outlook for FY27, amid heightened macro volatility, particularly due to the West Asia conflict. K. Krithivasan, chief executive of TCS, said that despite global uncertainty, the company continues to see strong client engagement and long-term deal commitments, positioning it for improved performance in the coming year.

TCS has struggled to grow more than 5% in the past three years, slower than peers Infosys Ltd and HCL Technologies Ltd. At 19.28% on the BSE, its shares have also fallen the highest among peers since January.

The company's management expects a gradual recovery in FY27, driven by a stronger business mix, productivity, and realization. Samir Seksaria, chief financial officer of TCS, said that the company successfully mitigated headwinds by improving business mix, productivity, and realization by 100 basis points. Rebalancing of the pyramid helped by 80 basis points, and support from currency also benefited margins by another 190 basis points.

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The company's profitability rose 70 basis points to 25%, which the management primarily attributed to the layoffs. Aarthi Subramanian, chief operating officer of TCS, said that the company is working with its customers to address the gap in AI-readiness by upgrading their infrastructure to be scalable and secure, modernizing their core applications, and setting up modern data foundations.

TCS reported $2.3 billion in annualized AI revenue for the January-March 2026 period. However, the company's revenue decline indicates that AI is testing the IT services industry's core model, forcing providers to deliver more value for less revenue in the short term.

The company's net profit for the full year jumped 3.5% to $5.94 billion, despite $157 million in severance-related payments to employees who were let go and also a one-time impact from labour codes, which will raise gratuity payments to employees. TCS ended last fiscal with 584,519 employees, down by 23,460 from the year ago, much of which can be attributed to its largest layoff drive last year.

The company won a mega deal valued at more than $1 billion in revenue over 10 years from Telefónica UK, the British arm of Spanish telecom giant Telefónica. The company renewed its billion-dollar IT transformation deal with UK-based retailer, Marks & Spencer, and also bagged a mega deal with a US-based healthcare and pharma company. The increase in large clients fetching upwards of $100 million annually rose by two last fiscal to 66.