AI Revenue Crosses 10% at TCS and Infosys in Q2

Artificial intelligence now brings in more than a tenth of the revenue at Tata Consultancy Services and Infosys, the two largest Indian IT services firms, after both companies reported Q2 results for the quarter ended September 30. TCS said its annualised AI revenue reached $3.1 billion in Q2 FY27, above 10 percent of its total revenue. Infosys said AI revenue rose 29 percent sequentially to $540 million, accounting for 10.5 percent of its revenue. TCS reported its results on October 8, and Infosys followed on October 23.

But the numbers have left analysts uneasy. The two companies measure AI revenue differently, and both admit that artificial intelligence is squeezing their traditional IT services business even as it adds new lines of work. HCLTech added to the confusion, saying AI had slowed its annual revenue growth by up to 4 percent because clients expect more efficiency at lower prices.

TCS takes the lead on AI revenue

TCS reported annualised AI revenue of $3.1 billion, up from $2.6 billion in the previous quarter, growing at a double-digit rate. The company said clients were increasingly adopting an AI-plus-human approach and that AI-related revenue carried higher margins than its overall business. Demand for AI-native solutions, AI-led enterprise transformation and autonomous business services kept accelerating, TCS said.

TCS's broader IT services business was steadier. Consolidated revenue was $7,642 million, up 0.5 percent sequentially in constant currency. Net income was $1,450 million, a net margin of 19 percent, while operating margin held at 24 percent. Total contract value, the lifetime value of new deals signed, was $9.6 billion. Headcount stood at 598,056 after the company added 4,258 employees in the quarter, and the board declared an interim dividend of 12 rupees per share.

Infosys posts fast AI growth

Infosys reported AI revenue of $540 million in Q2, up 29 percent from $417 million in Q1, making AI 10.5 percent of its total revenue. Large-deal total contract value was $5.2 billion, with 62 percent of it net new. Management said several AI projects were progressing well but acknowledged that AI was also causing compression in traditional services revenue. Infosys added 4,480 employees in the quarter.

Why AI revenue confuses analysts

The metrics use different definitions and reporting periods, so they do not establish a like-for-like ranking of the companies' AI businesses. HCLTech's advanced AI revenue rose 28.4 percent sequentially to $219 million, or $876 million on an annualised basis, yet the company said AI slowed its overall annual growth by up to 4 percent. Wipro did not provide a comparable AI figure; its chief executive Srini Pallia said clients were focusing on cost optimisation, legacy modernisation and scaling agentic AI.

For investors, the open questions are whether AI-led growth becomes incremental to revenue rather than partly replacing legacy services, whether discretionary IT spending recovers more broadly, and whether the firms can protect margins while investing heavily in AI capabilities. After TCS announced its Q2 results, the Nifty IT index climbed 11 to 14 percent in a few trading sessions, one of its strongest weekly performances in nearly 18 years. Investors began shifting money back into Indian IT companies as global AI stocks faced profit-booking and valuation concerns.