ata Consultancy Services (TCS), India’s largest IT services company, is steering through a phase of decelerated growth and changing client habits but remains bullish on future prospects. During a recent media interaction, TCS CEO K. Krithivasan delineated the firm’s strategic response to a global landscape characterized by conservative enterprise expenditure, persistent geopolitical uncertainty, and lengthening decision-making cycles. But he thinks the resolution of important global trade talks within the next few weeks could be a big turning point — particularly for discretionary IT spending.
A Global Slowdown and Shifting Client Behavior
The moderation of discretionary technology spends, especially from North American and European clients, has been the overarching issue. Krithivasan accepted that TCS has seen clients becoming more judicious in their IT investments since the March quarter, opting for projects with short-term yields versus long-term innovation.
“Customers are not canceling projects but are taking more time to decide,” he clarified. “If there is a clarity on tariffs and trade policies by July-end or early August, we expect a pick-up in IT spending, especially in the U.S.”
As mission-critical or ROI-positive projects continue, those with longer cycles of returns are either getting scaled back or delayed. This strategic realignment has created a domino effect across TCS’s international portfolio.
Vertical Declines and the BSNL Impact
The other main driver of TCS’s revenue fall was the winding-down of the multi-year BSNL (Bharat Sanchar Nigam Limited) contract. The contract, which had enabled the company to have stable domestic revenues, has now come to its natural end.
“More than 90% of BSNL sites are commercially live,” said Krithivasan. “While this is a successful deployment milestone, it also means corresponding drop in associated revenue.”
The revenue fall due to this migration alone affected the company’s quarter-on-quarter performance by almost 2.8%. TCS also saw a marginal 0.3% drop in overseas revenues. Across industries — from banking to retail — Krithivasan explained that there are no individual red flags from customers. Rather, the delays are indicative of greater market prudence and tighter cost vigilance in a gloomy global economy.
Artificial Intelligence: Promise and Practicality
Artificial intelligence (AI) continues to be a linchpin of TCS’s strategic framework. The company’s Chief Operating Officer spoke about the way AI is spurring productivity at the micro level, particularly in coding and testing activities.
But he also noted the constraints of looking at the benefits of AI in an isolated context.
You may be 20-30% faster on the delivery of some tech projects, but that doesn’t necessarily translate to the same benefit for the end client,” he said. “From conception through deployment, overall value may increase only 5-10%. That’s why we are looking at how to apply AI throughout the entire lifecycle.
Customers are starting to pay greater attention to this change, with numerous requesting AI-related efficiencies be accounted for in pricing. This heralds a shift from applying AI as a backend productivity technology to a value proposition ingrained in commercial dialogue.
Project Allocation and Employee Concerns
Behind the scenes, TCS’s internal workforce dynamics are also changing. With big deals slowing and project scopes decreasing, employees have registered longer wait times for new project assignments — popularly known as being “benched.”
Some employees have gone on social media to post about their doubts about delayed pay or the lack of communication during bench times. Although Krithivasan conceded these operational challenges, he clarified the company’s position:
“Our HR supports our associates, but in the end they are responsible for taking charge of their own career growth,” he added. “We spend a lot on training and reskilling. Projects are given based on client need and skills alignment — not employee wish.”
These words reflect a broader trend: with IT expenses constricting across the world, companies such as TCS are reconfiguring internal silos to remain lean, competitive, and client-oriented.
Looking Ahead: A Tipping Point in FY26?
While current headwinds remain in place, Krithivasan is hopeful. He feels that the impending conclusion of major international trade talks — particularly among the U.S., Europe, and large markets in Asia — can bring stability for the clients to return to normal consumption habits.
The next few months are critical. If trade and tariff policies are clear, we may see a turn-around by Q3 or Q4 and potentially beat FY25 revenues in FY26,” he added.
TCS is still placing its bets on a recovery in demand from the financial services, retail, and manufacturing industries, driven by AI-driven offerings, strong consulting services, and digital transformation programs.
