Tata Consultancy Services (TCS) CEO and Managing Director K Krithivasan expressed confidence in a stronger international business revenue outlook for fiscal year 2026 (FY26) compared to FY25, despite ongoing macroeconomic and geopolitical uncertainties. In an interview with Moneycontrol, Krithivasan stated, “Uncertainty cannot last long,” predicting that global trade negotiations, particularly between the U.S. and key partners like Canada and the EU, will gain clarity by late July or early August 2025, unlocking client IT budgets. Despite a challenging first quarter in FY26, with a 3.1% year-on-year revenue decline in constant currency to ₹63,437 crore, TCS’s robust $9.4 billion deal pipeline and strategic focus on AI and emerging markets fuel Krithivasan’s optimism. This article explores TCS’s performance, Krithivasan’s projections, and the implications for India’s IT sector.
Q1 FY26 Performance and Challenges
TCS, India’s largest IT services company, reported a 3.1% revenue drop in Q1 FY26 (April–June 2025) to ₹63,437 crore from ₹65,431 crore in Q1 FY25, primarily due to cautious client spending and the wind-down of a ₹15,000 crore BSNL contract, which impacted revenue by 2.8%. International markets, contributing 94% of TCS’s revenue, faced headwinds from global uncertainties, including U.S. tariffs on Canada and the EU, and geopolitical tensions affecting client confidence. North America (48.7%), the UK (18%), and Continental Europe (15%) remained key revenue drivers, but growth was subdued due to reduced discretionary spending on large-scale transformation projects.
Despite the revenue dip, TCS’s net profit rose 8.7% year-on-year to ₹12,040 crore, driven by operational efficiencies and a 150-basis-point improvement in EBIT margin to 24.7%. The company secured $9.4 billion in Total Contract Value (TCV) deals, surpassing analyst expectations of $8–9 billion, with significant wins in banking, financial services, and insurance (BFSI) and technology verticals. However, Krithivasan noted the absence of new mega-deals and a shift toward smaller, high-ROI projects, reflecting client caution amid global trade uncertainties.
Krithivasan’s FY26 Outlook
Krithivasan’s confidence in FY26 stems from his belief that the current economic and geopolitical environment will stabilize soon. He told Moneycontrol, “Uncertainty cannot last long. Once clarity comes in trade negotiations, hopefully by July-end or early August, we’ll see budgets opening up.” He predicts that even modest 1–2% sequential growth in the remaining quarters could push FY26 international revenue above FY25 levels, given TCS’s diversified portfolio and strong deal momentum.
International markets remain critical, with North America, the UK, and Continental Europe accounting for over 80% of revenue. Krithivasan highlighted growth in emerging markets like the Middle East and Africa (MEA, 2.3%), Asia Pacific (APAC, 2.7%), and Latin America (LATAM), with specific focus on Southern Europe, Korea, the Philippines, and Indonesia. Posts on X, such as @EconomicTimes, echoed this optimism, noting TCS’s “healthy deal wins” and potential for growth in emerging economies.
Krithivasan acknowledged that double-digit growth is a “tough ask” for FY26 due to global challenges but emphasized TCS’s resilience. The company’s headcount grew by 5,726 to 615,318 employees, and its focus on AI-driven services, such as the WisdomNext™ platform, positions it to capitalize on demand for generative AI and cloud solutions. TCS’s partnerships with Microsoft, AWS, and Google Cloud, along with projects like the IndiaAI Mission, further bolster its growth prospects.
Strategic Focus and Emerging Opportunities
TCS is adapting to a shifting IT landscape by prioritizing smaller, outcome-based projects and AI-driven solutions. Krithivasan highlighted the WisdomNext™ platform, which enhances enterprise AI adoption, as a key differentiator, with clients like Aviva and Nest leveraging it for operational efficiency. The company’s investment in sovereign cloud and cybersecurity, particularly for government clients in India and Europe, aligns with growing demand for secure digital infrastructure.
Emerging markets offer significant potential. TCS’s focus on Southern Europe (Italy, Spain, Portugal), Korea, and Indonesia taps into rising demand for digital transformation, with clients in these regions seeking cloud migration and AI solutions. The company’s $1.5 billion investment in capability centers in MEA and LATAM, as reported by The Hindu, aims to reduce reliance on traditional markets like North America, where tariffs and economic slowdowns pose risks.
Krithivasan also addressed India’s domestic market, which grew 3.8% in Q1 FY26, driven by government initiatives like the IndiaAI Mission and digital infrastructure projects. While the BSNL contract’s wind-down impacted growth, new deals in public sector modernization and smart cities are expected to offset losses.
Industry and Market Reactions
TCS’s Q1 FY26 results and Krithivasan’s outlook drew mixed reactions. Analysts, quoted by Mint, noted that the $9.4 billion TCV reflects strong deal momentum, but the lack of mega-deals and a 3.1% revenue drop raised concerns about near-term growth. X posts, like @CNBCTV18News, praised TCS’s margin improvement and hiring, with 5,726 new employees signaling confidence. However, @ReutersIndia highlighted client caution due to U.S. tariffs and geopolitical tensions, aligning with Krithivasan’s view that clarity in trade talks is critical.
The broader IT sector, including peers like Infosys and Wipro, faces similar challenges, with analysts expecting subdued growth in FY26 due to global uncertainties. TCS’s focus on AI and emerging markets, however, positions it ahead of competitors, as noted by @BloombergQuint, which called TCS “a bellwether for India’s IT industry.” Investors responded positively, with TCS shares rising 2.8% on the BSE to ₹4,015 post-results, reflecting trust in Krithivasan’s strategy.
Broader Implications
Krithivasan’s prediction of stronger FY26 international revenue underscores TCS’s resilience amid global headwinds, but it also highlights the IT sector’s vulnerability to macroeconomic shifts. The anticipated resolution of U.S. tariff disputes with Canada and the EU could unlock discretionary spending, benefiting TCS’s BFSI and technology verticals, which account for 40% and 20% of revenue, respectively. However, prolonged uncertainty could delay recovery, impacting India’s $250 billion IT services industry, which employs over 5 million people.
TCS’s pivot to emerging markets and AI-driven services aligns with global trends, where enterprises prioritize cost-efficient, high-impact projects. The company’s investment in training 80% of its workforce in generative AI, as mentioned by Krithivasan, positions it to lead in next-generation technologies. However, challenges like talent retention, with attrition dropping to 12.7% in Q1 FY26, and competition from global players like Accenture require sustained innovation.
TCS CEO K Krithivasan’s optimistic outlook for FY26 international revenue reflects confidence in the company’s robust deal pipeline, AI-driven growth, and expansion into emerging markets like Southern Europe and APAC. Despite a 3.1% revenue decline in Q1 FY26, driven by the BSNL contract wind-down and global uncertainties, TCS’s $9.4 billion TCV and strategic focus on high-ROI projects signal resilience. Krithivasan’s belief that trade clarity by August 2025 will boost client spending underscores TCS’s proactive approach. As India’s IT bellwether navigates a challenging global landscape, its emphasis on AI, cybersecurity, and diversification positions it to outperform FY25, setting a benchmark for the industry’s recovery and growth.
