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TCS: AI Revenue to Counter Deflation's Bite
12 Oct
Summary
- TCS expects AI revenue to offset deflation in traditional services.
- About 50% of AI-led deflation has been sustained; more expected.
- Client budgets are stable, with focus on AI and modernization.
Tata Consultancy Services (TCS) projects that artificial intelligence (AI) revenue will soon offset deflationary pressures impacting its traditional services. CEO K Krithivasan indicated that roughly half of the AI-led deflation has already been absorbed, with an additional 50% anticipated over the next 18 months. The company is focusing on clients eager to deploy AI and undertake technology modernization, despite stable overall budgets amid geopolitical uncertainties.
AI revenue, which surpassed 10% of TCS's total revenue in the September quarter, is expected to compensate for declines in legacy service areas in the medium term. Krithivasan highlighted TCS's active role in AI, including partnerships with major providers and establishing an AI data center, countering any perception of the IT industry being "anti-AI."
Despite some sequential growth being muted, TCS reported strong year-on-year profit and revenue increases. The company is navigating macroeconomic challenges by assuming client budgets will remain consistent, with a clear emphasis on AI and modernization initiatives driving future spending and value.
