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A Tata Consultancy Services campus as the firm reports steady AI-led growth alongside profit pressures.
X handle/TCS
TCS breaks two-year North America slowdown on AI deals
Jan 12, 2026
- AI services drive quarterly revenue slightly above forecasts.
- North America returns to growth after a two-year slowdown.
- Net profit slips amid restructuring and legal costs.
India’s Tata Consultancy Services has posted third-quarter revenue marginally above market expectations, helped by steady demand for artificial intelligence-led services and a long-awaited pickup in its North America business.
The company, part of the Tata Group, reported consolidated revenue of about £5.86 billion ($7.44 billion) for the quarter ended December 31, up 4.9 per cent year on year. Analysts had been expecting roughly £5.26 billion, according to LSEG-compiled estimates.
AI does the lifting
Artificial intelligence-related spending provided a boost in what is usually a seasonally softer quarter for the IT sector. TCS said its AI services are now generating around £1.42 billion ($1.8 billion) annually, accounting for about 5.8 per cent of total revenue.
The improvement was most visible in North America, which contributes nearly half of TCS’s revenue. The region recorded growth for the first time since July–September 2023, suggesting the demand slowdown may have bottomed out.
However, caution remains. Clients across India’s $283 billion IT industry continue to watch spending closely, amid concerns about growth in the US economy, uncertainty over US tariffs and proposed visa fees of $100,000, which could add pressure to hiring and mobility.
Profits under pressure
Despite the revenue lift, quarterly net profit fell 14 per cent to around £0.84 billion (₹106.57 billion), missing analyst expectations of about £1.02 billion. TCS attributed the decline to one-off restructuring costs linked to layoffs, the impact of India’s new labour codes introduced in November 2025, and other legal expenses.
Order intake also softened. The company’s total order book stood at £7.33 billion ($9.3 billion) for the quarter, down from £8.03 billion a year earlier.
Regionally, five of TCS’s eight markets posted growth. The Middle East and Africa led with an increase of 8.3 per cent, followed by Continental Europe at 3.5 per cent. Slower performance in banking and financial services and retail was attributed to year-end seasonality, with a recovery expected from the ongoing quarter.
Ambarish Shah, analyst at Systematix, reportedly said that while North America had improved as demand stabilised, the recovery was likely to be gradual given ongoing structural weakness.
TCS declared a dividend of ₹11 per share, along with a special dividend of ₹46 per share. Its Mumbai-listed shares closed 1.3 per cent higher ahead of the results.
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