1QFY27 better than feared; still in transition phase

Research evidence excerpt

1QFY27 better than feared; still in transition phase

UpdateM

Conference Call Takeaways

Order intake and growth outlook: TCS reported order intake (TCV) of US$9.5bn in

1QF27, including a US$800mn mega-deal with SKF (its sixth mega-deal in the past five

quarters), a multimillion-dollar strategic partnership with ServiceNow, and a multimillion-

dollar deal with a Europe-based Fortune Global 50 client. Growth was led by BFSI, tech/

software and services, regional markets, and products and platforms, while the consumer

business was affected by inflationary pressures and geopolitical uncertainty, and

manufacturing showed softness in auto. Management expects manufacturing and life

sciences to turn around in 2Q, tech services to continue growing, and consumer to recover

once geopolitical sentiment improves. Client additions remained healthy across the US

$10mn+, US$5mn+, and US$1mn+ bands sequentially.

Gen AI: Annualized AI services revenue crossed US$2.6bn at the end of 1QF27, up 13.6%.

Management stated that client priorities are increasingly aligned with AI-led

transformation, modernization, cybersecurity, sovereign platform rationalization, and

vendor consolidation, with AI programs being delivered across IT operations, software

engineering modernization, business process transformation, and enterprise platform

implementation. Agentic AI was highlighted as rapidly dominating customer conversations

and gaining traction in business process services, with autonomous GBS (Global Business

Services) wins across HR, finance, and customer experience shifting to outcome-based

commitments.

Margins: TCS reported an operating margin of 24.0% in 1QF27, down 130bps QoQ,

primarily due to annual wage increments (170bps impact), partly offset by 40bps of