Tata Consultancy Services, India’s largest IT services and consultancy company, reported its second quarter earnings for FY26, on Tuesday. The company recorded a revenue of $7.4 billion for the quarter, up 0.6% quarter-on-quarter (QoQ; 0.8% in constant currency) with its profit margin seeing an expansion of 70 basis points (bps) sequentially at 25.2%. However, the company's net profit margin slipped 50 bps, from 20.1% in the last quarter, to 19.6% in Q2FY26.

TCS cancelled its post-results press conference as it coincided with the first death anniversary of Ratan Tata. During the analyst call, CEO & MD K. Krithivasan, said that even amidst continued macro challenges, all verticals except consumer performed well. “We continue to see robust sales momentum this quarter across industries and markets. We are pleased to report a TCV (total contract value) of $10 billion. BFSI TCV was at $3.2 billion, Consumer Business Group contributed $1.8 billion. North America TCV was $4.3 billion. Our TCV had a sequential increase of 6.5% and a YoY growth of 16%,” Krithivasan said. 

Pointing at enterprises still maintaining a tight lid over discretionary spends and a continued preference for vendor consolidation to achieve efficiencies, Krithivasan said, “Based on client conversations, Q2 revenue growth, TCV, and the strong demand pipeline, we expect FY26 international revenue growth to surpass that of the previous fiscal year. IT services spending remains steady with no significant changes expected in the near term. Lingering uncertainties in the broader economic environment continue to pose a key challenge."  

AI bet 

TCS has also announced the creation of a new subsidiary to support its AI ambitions. The new company will establish a 1-gigawatt (GW) AI data centre in India gradually. Detailing the plan, Krithivasan told analysts, “We expect to achieve 1 GW over a period of 5 to 7 years, and our calculation roughly is that every 150 megawatts would be about a billion dollars.” The nearly $6 billion investment will include both equity and debt, with finance partners for the equity. Following the recent announcement of a sovereign cloud by TCS that aims to host data and compute in India, the company hopes to sell this solution to AI providers, deeptech companies, hyperscalers, the government of India, and other Indian enterprises. 

The company has also acquired ListEngage, a US-headquartered Salesforce practice company focussed on digital marketing transformation for clients through Salesforce platforms like Marketing Cloud, Data Cloud, and Agent Console, along with AI advisory services. TCS will pay nearly $72.8 million in cash for the acquisition and will absorb the existing 100-member team. 

TCS layoffs and H-1B

Q2FY26 also saw TCS’s workforce decrease by nearly 20,000 employees compared to the last quarter. The total workforce at the end of the second quarter was 593,314, down from 613,069 in the previous quarter. The company also stated that it had given increments to nearly 80% of its employees. “This increment, combined with additional quarterly variable allowances, impacted our margins by 70 basis points, offset by the benefit of 40 basis points from rebalancing of the pyramid and 20 basis points from operating efficiency, " said Samir Seksaria, Chief Financial Officer, TCS. 

With attrition at 13.3% (for the last 12 months or LTM) in the IT services business, the company said nearly 6,000 employees, or 1% of the workforce—mainly mid- and senior level with skill and capability mismatches—were part of the layoffs. “We are providing the impacted employees with benefits, counselling, and outplacement support for the transition, as well as the severance that exceeds industry standards. Additionally, there has been involuntary attrition as part of ongoing efforts related to performance and bench policies,” said Sudeep Kunnumal, the newly appointed Chief HR Officer who took charge starting October 1. TCS reported expenses of nearly ₹1,135 crore in the second quarter related to restructuring. 

Over the years, as one of the largest recipients of H-1B visas in the US, TCS has emphasised that it now has a significantly localised workforce in the country. “Approximately, just about 500 associates have travelled to the US on H-1B,” said the Chief HR Officer. “We believe our business model will be able to adapt quickly to any changes in immigration policy.”