Tata Consultancy Services Ltd (NSE: TCS) Q4 2026 Earnings Call dated Apr. 09, 2026
Corporate Participants:
Nehal Shah — Investor Relations
Kunchitham Krithivasan — Chief Executive Officer and Managing Director
Aarthi Subramanian — Executive Director- President Chief Operating Officer
Samir Seksaria — Chief Financial Officer
Sudeep Kunnumal — Chief Human Resources Officer Designate
Analysts:
Sudhir Guntupalli — Analyst
Kumar Rakesh — Analyst
Yogesh Aggarwal — Analyst
Nitin Padmanabhan — Analyst
Vibhor Singhal — Analyst
Ashwin Mehta — Analyst
Rishi Jhunjhunwala — Analyst
Gaurav Rateria — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the TCS earnings conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Nehal Shah from the Investor Relations team at TCS. Thank you and over to you.
Nehal Shah — Investor Relations
Thank you, operator. Good evening and welcome everyone. Thank you for joining us today to discuss TCS’s financial results for the fourth quarter and full year FY 2026 that ended on March 31, 2026. This call is being webcast to our website and an archive including the transcript will be available on the site for the duration of this quarter. The financial statements, quarterly fact sheets, and press releases are also available on our website. Our leadership team is present on this call to discuss our results. We have with us today Mr. K. Krithivasan, Chief Executive Officer and Managing Director.
Kunchitham Krithivasan — Chief Executive Officer and Managing Director
Hi, everyone.
Nehal Shah — Investor Relations
Ms. Aarthi Subramanian, Chief Operating Officer and Executive Director.
Aarthi Subramanian — Executive Director- President Chief Operating Officer
Good evening, everyone.
Nehal Shah — Investor Relations
Mr. Samir Seksaria, Chief Financial Officer.
Samir Seksaria — Chief Financial Officer
Hello, everyone.
Nehal Shah — Investor Relations
And Mr. Sudeep Kunnumal, Chief HR Officer.
Sudeep Kunnumal — Chief Human Resources Officer Designate
Hello, everyone.
Nehal Shah — Investor Relations
Our management team will give a brief overview of the company’s performance followed by a Q&A session. As you are aware, we don’t provide any specific revenue or earnings guidance, and anything said on this call which reflects our outlook for the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. We have outlined these risks in the second slide of the quarterly fact sheet available on our website and emailed out to those who have subscribed to our mailing list. With that, I would like to turn the call over to Krithi.
Kunchitham Krithivasan — Chief Executive Officer and Managing Director
Thank you, Nehal. Good day, everyone, and thank you for joining us today. I would like to open with five key messages for the quarter and the year. First, about Q4. We are very pleased to announce the third consecutive quarter of sequential growth. We delivered a strong 1.2% sequentially on a constant currency basis in the backdrop of intensifying geopolitical conflicts and macroeconomic uncertainty. This momentum was broad-based across major markets, with North America growing 1.4% Q-o-Q, U.K. growing 2.4%, and Europe growing 1% on a CC basis. Most of the industry segments also grew. Our order book performance was also very strong in Q4, with $12 billion in TCV, including three mega-deals from Marks & Spencer, the leading telecom operator in the U.K., and the leading American healthcare and pharmaceutical company. This underscores the strength of our five-pillar strategy and our AI-led positioning across services.
The second key message is our client metrics. You will see from the fact sheet that every revenue band saw healthy additions this quarter after a gap of about two years. This speaks to the early signs of stability and growth returning to our mid-sized and large accounts. The number of accounts where we generate more than $100 million annually increased by four quarter-on-quarter, bringing the total to 66. We added three more clients in the $50 million band, bringing the total to 139, and 14 more clients in the $1-million-plus band, bringing the total to 1,397 from last quarter.
The third message is on the announcement of salary increments. We announced salary increments for all our associates across all grades — all eligible associates across all grades effective 1st of April. Fourth, the momentum we see in our AI services. This continues to accelerate very impressively, standing at $2.3 billion on an annualized basis.
Lastly, the promise we see in our HyperVault business, which has made significant progress this quarter on its journey to build out one gigawatt of capacity. This includes winning customer commitments, land parcel finalizations, and partnering agreements. They are actively engaging across the full ecosystem of hyperscalers, semiconductor companies, and model providers, while TCS is the integration partner across infrastructure, engineering, and AI-led services. Demand signals remain strong and are translating into structured engagements and commitments, positioning TCS at the forefront of this build-out. As we progress, this infrastructure layer is forming the foundation of TCS’s full-spectrum play from infrastructure to intelligence.
Coming to our full-year performance, even though our FY ’26 revenue declined by 2.4% in constant currency, we delivered a strong $40.7 billion in TCV, including five mega-deals. We maintained a strong focus on execution to deliver an operating margin of 25%. This is the highest operating margin achieved in the last four years. And as enterprises navigate increasing complexity across technology, operating models, and business transformation, the role of trusted system integrators has become even more vital. Clients are looking for partners who can bring deep technology excellence, strong enterprise and industry context, and take end-to-end accountability with confidence on the outcome and ROI.
In FY 2026, TCS was uniquely positioned to meet these expectations through sustained investments in AI-led engineering, a highly skilled and scalable talent base, differentiated solutions, and a strong partner ecosystem. This has translated into the major highlights I talked about earlier, broad-based client additions across revenue bands, strong TCV, and continued momentum in large deals, with clients showing greater willingness to commit to long-term, multi-year, multi-million dollar partnerships, reflecting the trust they place in TCS, to deliver certainty on value at scale over extended transformation journeys. I will now invite Samir, Aarthi, and Sudeep to go over different aspects of our performance during the quarter. I’ll step in later to provide more color on the demand trends we are seeing in our key verticals and our outlook for the next year. Over to you, Samir.
Samir Seksaria — Chief Financial Officer
Thank you, Krithi. Good day to all. I’ll start with the commentaries on the recent quarter and then proceed to the full-year numbers. In the fourth quarter of financial year 2026, our revenue was INR70,698 crores, which is a quarter-to-quarter growth of 5.4%. In dollar terms, revenue was $7.621 billion, a quarter-to-quarter growth of 1.5%. In constant currency, we had a sequential revenue growth of 1.2%. Our Q4 operating margin stood at 25.3%, a sequential increase of 10 basis points.
During the quarter, we saw an improvement in realization, driven by continued focus on value-led delivery. Currency was also supportive during the quarter, providing a translation tailwind. These factors contributed to a benefit of around 40 basis points and 110 basis points, respectively. Consistent with the Build-Partner-Acquire strategy that we shared at our Analyst Day, we consciously reinvested these tailwinds back into strengthening our capabilities and growth engines.
Under Build, we saw higher external consultants cost of 40 basis points to capture the demand and to ensure delivery timelines and quality were protected while we continue to scale internal capabilities. In parallel, we made targeted interventions in critical talent, certifications, upskilling, and the creation of niche delivery pods. These investments are aimed at building a scalable, future-ready AI delivery model that straddles the entire stack across our infra-to-intelligence strategy layout. Also, the ongoing impact of India Wage Code is included. Together, these two accounted for an impact of 40 basis points.
Under Partner, we stepped up investments in ecosystem partnerships, reflected in multiple announcements such as OpenAI, AMD, and ServiceNow, made during the quarter. These investments are focused on industrializing AI solutions, are increasing cross-sell opportunities, and improving speed-to-value for clients through deeper hyperscaler and platform collaborations. We also increased go-to-market activity with higher participation in client events, showcases, and industry forums. This is directly linked to expanding the demand pipeline and improving conversions by demonstrating our AI and platform-led offerings. Together, these two accounted for a margin impact of 50 basis points.
Finally, aligned to Acquire, we incurred integration-related investments of approximately 10 basis points as we embedded acquired capabilities in our operating model. This included talent alignment, platform integration, go-to-market enablement, and delivery readiness, all aimed at accelerating synergy realization and scaling new offerings. Net margins for Q4 were 19.4%, and our EPS grew 12.2% year-on-year. Our accounts receivable stood at 74 DSO in dollar terms for Q4, down two days sequentially. Our cash conversions this quarter continue to be strong, exceeding 100% of our net profits. Net cash from operations was $1.6 billion, which is 106.7% of our net income. Invested funds at the end of the period stood at $5.3 billion.
Coming to the full year, FY ’26, our revenue was INR267,021 crores, which is a growth of 4.6% on a year-on-year basis. In dollar terms, the reported revenue was $30.017 billion, a decline of 50 basis points. In constant currency terms, revenue declined 2.4% on an annual basis. For FY ’26,, the operating margin was 25%, an expansion of 70 basis points over the prior year and a four-year high.
In FY ’26, our investments in talent and capability building led to 200 basis points headwind. We also incurred an additional 100 basis points headwind on account of other investments for strengthening ecosystem partnerships and increasing our GTM pipeline. We successfully mitigated these by improving our business mix, productivity, and realization by 100 basis points. Rebalancing of the pyramid helped by 80 basis points and support from currency also benefited margins by another 190 basis points. The operating margin for the year excludes a few one-offs recognized during this year. These exceptional items relate to severance-related expenses, legal provisions, and the impact of changes in the India Wage Code. Net margins for FY ’26 were 19.8% and our EPS grew 8.8% year-on-year. Our effective tax rate for the year was 24.6%.
Going forward, we continue our investments to maximize growth. Our operational vigor will continue to focus on optimizing margins, robust cash conversion, and strengthening the balance sheet. We remain firmly committed to returning substantial free cash flows to our shareholders through a consistent and shareholder-friendly dividend policy, while prudently expanding investments under the Build, Partner, Acquire framework to strengthen long-term growth. The board has recommended a final dividend of INR31 per share, taking the total dividend in the year to INR110. I’ll now invite Aarthi.
Aarthi Subramanian — Executive Director- President Chief Operating Officer
Thank you, Samir. Good evening to all of you. FY ’26 was a pivotal year for enterprise AI adoption across industries. For the first time since the advent of GenAI in late 2022, the shift from experimentation to scaled AI deployment showed a marked improvement. AI became a core part of our every customer conversation and solutioning, creating a tailwind for enterprise AI adoption. In Q4, our annualized AI revenue surpassed $2.3 billion, driven by the accelerated deployment of AI solutions across industries. We experienced strong deal momentum across new services in enterprise transformation, digital engineering, and cloud modernization.
Our HyperVault business has made significant progress since the announcement in October 2025. Last quarter, I spoke about our two-pronged approach to engaging deeply with our customers on AI, one, to help them get ready with AI, and two, to partner with them to lead with AI. Let me share some more detailed updates on both of these areas. While our customers want to accelerate AI adoption, their current enterprise stack lacks the readiness for what it takes to scale. We are working with our customers to address this gap by upgrading their infrastructure to be scalable and secure, modernizing their core applications, and setting up modern data foundations. A significant part of the technology spend is being invested in these areas.
Let me share a few examples. TCS modernized mission-critical crew management systems with generative AI for a European airline. We reverse-engineered complex legacy systems to reconstruct the core business logic embedded in these systems. This modernization was powered by Google’s Gemini platform. The airline now has a scalable foundation to build new-age crew operation solutions. For a car rental company in the U.S., we executed a complex, high-stakes legacy data warehouse migration system moving over 20 terabytes of mission-critical data to a modern data platform. This program decommissioned their legacy systems, delivering an estimated $2.5 million in savings. But more importantly, it established a scalable data foundation for them to get ready for AI.
To help our customers implement AI in their own context, we have created an AI Acceleration Playbook. Innovate with AI, Build with AI, and Scale with AI. This year, we deployed this playbook across a significant number of our customers to solve high-value business problems in rapid deployment cycles of 12 to 16 weeks. For a leading utility company in the U.S., we conducted CXO-level AI immersion programs to identify challenges that can be best solved with AI. We also built their enterprise AI platform, which provides a secure, scalable foundation to industrialize AI adoption.
Physical AI deployment is also gaining traction in the industrial sector. Digital twins, computer vision, and quadruped-based solutions are driving efficiency, throughput, and safety. For an electronics manufacturer in the fabrication facility, we are integrating NVIDIA Omniverse-driven digital twins with autonomous quadruped-based inspection systems. This physical AI solution is driving better construction accuracy and proactively identifying safety hazards.
Redefining every service line is central to our five-pillar strategy. TCS has created a services redesign framework, which we call our Human plus AI service autonomy model. This model integrates service-line-specific industry-leading tools, which are integral to delivering value in the customer context. This is resonating well with our customers as it provides a well-defined framework for consistent deployment across the enterprise. We are taking AI-led redesign services proactively to our existing customers and new prospects. In the last two years, AI model capabilities have evolved tremendously and rapidly. Yet there is a gap in enterprises realizing the true potential of these technologies. One of the challenges our customers face is that they have invested in these tools but are not yet reaping the expected productivity benefits. Our goal is to systematically help our customers address these gaps with our Human plus AI service autonomy model.
For a retailer in the U.K., we deployed the AI engineering framework with agents through the software lifecycle from translating unstructured requirements into structured specifications, as well as executing spec-driven coding, testing, and deployment. Our human-plus-AI approach accelerated software delivery and reduced the deployment cycle time by about 40%. Business Process Services is becoming a fast-adopter of agentic AI. We are working with multiple customers on their AI-led GBS transformation. For a steel major, TCS proactively deployed AI agents in the procurement freight management process, resulting in the order-to-invoice cycle reducing from 28 days to under 10 days.
In FY ’26, all next-gen services delivered strong growth across industries and markets backed by our continued investments in AI talent and innovative solutions. In FY ’26, we invested significantly in strengthening our AI partnerships. This includes enterprise partners, hyperscalers, deep-tech AI-native partners, and domain-specific partners. In Q4, we forged several strategic partnerships that have expanded our joint collaboration. This includes our partnership with ServiceNow, Google Cloud, and with ABB. With OpenAI, we announced a partnership spanning multiple high-impact areas, empowering Tata Group employees with ChatGPT Enterprise, building industry-specific agents, joint go-to-market initiatives, and creating a state-of-the-art AI infrastructure.
Finally, I would like to provide an update on TCS HyperVault. Our engagements with hyperscalers and frontier AI model companies have moved beyond early exploration into design alignment, security framework, site due diligence, and commercial structuring. We see the demand converging around large anchor AI workloads in the 100 to 200-megawatt range per customer. We have aligned a deep partner ecosystem including Tata Power, Tata Projects, Tata Communications, as well as GE, Honeywell, ABB, Siemens, and many of our customers to cover EPC, power, cooling, controls, networks, security, and many such areas.
Some of the key announcements we made this quarter, as I said earlier, is the OpenAI partnership to build 100-megawatt capacity with an option to scale to one gigawatt. In collaboration with AMD, we are combining their world-class Helios rack-scale AI architecture with Tata Group synergies to create high-density AI capacity in India. We also signed an MOU with ABB to strengthen joint collaboration across IT infrastructure applications, digital and industrial AI initiatives, as well as data centers and other emerging technologies.
In summary, FY ’26 saw a good momentum in AI and new services. As we move into FY ’27, we will continue to accelerate the deployment of our five-pillar AI strategy. We are well positioned to support our customers with the deep knowledge of the enterprise context that we possess and our ability to integrate AI into the customer business and technology landscape to create customer value. Thank you. I would now like to hand it over to Sudeep.
Sudeep Kunnumal — Chief Human Resources Officer Designate
Thank you, Aarthi. Hello again, everyone. At the outset, I would like to thank all our employees and their families stationed in West Asia for their utmost dedication and resilience during these tough times. All our employees and their families in the Middle East are safe, and we are in constant touch with them, providing the necessary support. At the end of March 2026, our global headcount stood at 584,519, with associates from 149 nationalities of whom 35.2% are women. We have announced annual increments to all eligible employees across grades effective April 1, with top performers getting a double-digit increase.
We are focused on building a future-ready organization by strategically hiring both fresh graduates and experienced professionals. Our recruitment efforts have been concentrated on individuals with expertise in AI, data, enterprise solutions, software engineering, cloud, cybersecurity, and digital engineering. In FY ’26, we also hired over 750 employees with deep advisory and consulting expertise. We stepped up our investment in talent development initiatives as well. In FY ’26, a total of 69 million learning hours has been completed and 5.2 million competencies have been attained by our associates. Over 470,000 associates now possess advanced proficiencies in AI and machine learning.
TCS demonstrates its commitment to innovation by being its own “Customer Zero,” adopting and refining AI technologies across internal HR practices before deploying them externally. Within the human resources functions, we are embracing AI as follows nearly half of the internal resource allocations occur through our internal talent marketplace, which uses AI-driven recommendations to match demand and supply. Our GenAI-powered learning coach platform has helped over 100,000 TCS employees improve their proficiencies through targeted, role-specific learning. Our GenAI-enabled interviewer accelerates hiring with technical assessments, while our AI recruitment platform enhances post-offer engagement to help answer very specific queries. The AI system provides instant multilingual contextual HR policy support, improving employee experience. We have further strengthened our position as employer of choice globally and are pleased to have been recognized as an enterprise-wide top employer for the 11th consecutive year by the Top Employers Institute, reflecting our commitment to foster an inclusive and engaging workplace where our people can thrive and grow. I would now like to invite Krithi back.
Kunchitham Krithivasan — Chief Executive Officer and Managing Director
Thank you, Sudeep. Scaling enterprise AI adoption requires organizations to address technology debt, data readiness, and operating model complexity. AI will enable clients to rapidly move from end-customer feedback to demand identification to code. With every tech cycle, clients have realized far greater value, and TCS has scaled its business. With AI, TCS aspires to be the world’s largest AI-led tech services company.
This aspiration is powered by capitalizing on AI-led renewals, vendor consolidation, and cost optimization deals, resulting in market share gains; using new-age services and adjacencies that enable enterprises to get ready for AI; becoming a full-stack AI services player — that is infrastructure to intelligence, thereby delivering maximum ROI to clients on their AI investments through end-to-end industry value chain reimagination; and building new revenue streams such as building AI infrastructure.
In FY ’26, we made good progress across all the above opportunities. The strong order book closure was led by vendor consolidation, AI-led modernization, scaling AI across the enterprise, digital core and data platform organization, operating model transformation, and regulatory compliance.
Let me now share some specific details of our industry-wise performance during this quarter. In BFSI, the BFSI vertical continued to grow this quarter. In BFSI, client-specific demand remained technology-led and outcome-focused through Q4, shaped by heightened macro and geopolitical volatility. Increased uncertainty around interest rates, inflation, and central bank actions influenced client sentiment, resulting in cautious investment decision-making. Despite this backdrop, BFSI clients continued to prioritize core and legacy modernization, data estate transformation, cloud migration, and scaled AI-generated deployments, productivity-led operating model transformation, and vendor consolidation. Spending patterns increasingly shifted from experimentation to industrialized business-driven transformation with a strong emphasis on cost discipline, regulatory resilience, and measurable outcomes.
Our Consumer Business Group saw another quarter of good growth supported by market share gains and emerging pockets of technology conviction, resilience, and guarded optimism. Retail globally and TTH in U.K. and EMEA led the growth, while CPG and TTH North America segments declined. Enterprises continue to tightly align spending to initiatives delivering near-term efficiency, cost control, and operational resilience, with growing emphasis on vendor consolidation, technology simplification, legacy modernization, and selective AI and Gen AI adoption. CBG had two mega-deal wins this quarter, which helped propel its TCV to an all-time high. One of the two mega-deals was the renewal and expansion of our services to Marks & Spencer, a customer of TCS for well over a decade. The deal is a testimony to the deep trust and strong partnership between the two organizations. The other mega-deal is with the leading American healthcare and pharmacy retailer, which is another longstanding and strategic partnership of TCS. We are very proud to have retained this particular partnership as well.
Clients are appreciating TCS’s track record of successfully delivering transformation programs more than ever. An excellent example is what we are doing for this pharma retailer. For them, TCS partnered to modernize its mission-critical claims processing system. Operating at a massive scale, processing over five million prescriptions daily, the platform underpins core pharmacy operations including claims validation, accumulation and tracking of patients’ out-of-pocket expenses, and ordering replenishment reporting. As prescription volumes continue to rise, the legacy architecture began to limit performance, real-time visibility, and scalability, creating operational bottlenecks across the ecosystem.
Leveraging deep domain expertise and contextual knowledge, TCS reimagined process flows and led the comprehensive cloud-native re-architecture of the platform. The transformation introduced event-driven processing, complex multi-system integration, and world-class enterprise-grade security to ensure resilience and compliance. This has enabled near real-time processing, compressing claim cycles from 48 hours to just 12 hours, data-driven decisioning leveraging AI, and auto-scaling to support growing prescription volumes and rapid onboarding of new entities, positioning the client for sustained future growth.
Now, let me talk about our Life Sciences and Healthcare group, which saw marginal growth this quarter. Healthcare payers are managing rising costs and growing friction with providers due to pre-authorization claims issues. Key priorities include affordability, transparency, simplicity, and better patient experience. Organizations are focusing on data marketplaces, cyber resilience, and AI to boost productivity, while regulatory changes add to compliance costs and administrative burdens, prompting selective modernization focused on efficiency. The pharmaceutical industry is streamlining pipelines and adopting AI to tackle growth and pricing pressures. Companies in the Americas, U.K., and EU are focusing on efficiency through vendor consolidation, tech modernization, and enterprise-wide transformation.
The Manufacturing vertical also saw good growth this quarter, despite the macro uncertainties and the impact to the global supply chains. Client demand across manufacturing remained cautious in Q4, shaped by macroeconomic uncertainty, tariff volatility, recalibration of EV demand, and continued restraint in capital expenditure across automotive, industrial, and chemicals. Customers prioritized near-term cost optimization and operational resilience with a sustained focus on AI-led productivity, including predictive maintenance and quality automation, alongside ERP and cloud modernization to streamline operations and improve reliability.
The Technology and Software segments saw reasonable growth this quarter given the environment. Client demand in Q4 remained disciplined amid a challenging macro environment shaped by heightened geopolitical tensions, regulatory uncertainty, and increasingly stringent manufacturing and data sovereignty requirements. Customers continued to prioritize cost rationalization to fund a strategic pivot towards AI-led transformation, with spend focused on vendor consolidation, GCC expansion, and structural efficiency, and the resulting savings reinvested into scaling AI across core operations and product portfolios. Incremental investments were also directed towards digital sovereignty and supply chain resilience.
CMI saw a modest decline this quarter but we are witnessing promising signs of a rebound in IT spending. Telecommunication companies are advancing their journeys to expand into adjacent businesses while simultaneously enhancing the efficiency of their core operations. This strategic shift is paving the way for growth and innovation. Momentum remains strong in securing large deals within the telecommunication sector. We have signed our first mega-deal in CMI in this quarter, a significant expansion of its long-standing partnership with a leading U.K.-based telecom operator. This five-year contract will see TCS lead the operator’s comprehensive IT transformation journey for its consumer business, leveraging advanced AI, cloud, and digital engineering capabilities. The expansion, built on the strength of years of trusted partnership and demonstrated delivery, will see TCS take end-to-end responsibility for running the entire IT system of the operator’s consumer base and become its strategic technology partner, consolidating the entire landscape previously spread across multiple service providers.
ERU demonstrated robust growth this quarter. Within ERU, the energy and resources segment performed well, led by supply chain modernization initiatives gathering momentum in the near term. However, the utility segment is experiencing stress and significant cost optimization opportunities are opening up.
In summary, even in a year marked by global uncertainty, we have demonstrated resilience, discipline, and the ability to lead through complexity. Our performance in FY ’26 reflects not just strong execution, but enduring trust from clients who are committing to longer-term partnerships and from associates who continue to drive transformation at scale. With a robust order book, expanding client relationships across revenue bands, accelerating AI momentum, and foundational investments like HyperVault, we are building the next phase of TCS with conviction. As enterprises increasingly seek partners who can deliver certainty, accountability, and outcomes end-to-end, TCS stands exceptionally well-positioned, combining technology excellence, deep contextual knowledge, and scale to help our clients navigate change and create sustainable value. We enter the new year with confidence, clarity of purpose, and an unwavering focus on delivering growth with resilience and trust. With this, I will now open the line for questions.
Questions and Answers:
Operator
[Operator Instructions] We’ll take our first question from the line of Sudhir Guntupalli from Kotak Mahindra AMC. Please go ahead.
Sudhir Guntupalli
Hi, Sudhir. Thanks for the opportunity. My first question, is there any perceivable change in quantity or quality of client inquiries or even bookings around agentic AI implementation post the first week of February when Anthropic announced a string of agentic AI launches?
Kunchitham Krithivasan
Sudhir, I won’t say that it’s definitely clients are curious to know about the capabilities and expanding, I’m sorry, expanding capabilities of all the models. And they also want to leverage their models to achieve both productivity as well as business value chain reimagination. But is it because after post-anthropic? I won’t say that. There’s been a general, as the model capability improve, there’ll be more and more interest in seeing how they can leverage them.
Aarthi Subramanian
Client interest and demand actually increases with new capabilities coming out of the model providers.
Sudhir Guntupalli
Fair enough. The second question, many of these frontier model companies, they are just announcing new projects or agents which may be in their development pipeline but not yet launched, the latest example being Claude Mythos. Is this in any way leading to clients deferring their existing IT spend to maybe wait and watch once the product actually hits the shelf, maybe a few months or years down the line?
Kunchitham Krithivasan
We have not seen that, Sudhir. As I said, our clients are quite interested in leveraging it. They know this will be constantly evolving and there is no major benefit in waiting for the next best model to come. So, our clients are willing to invest now and they know, and we have been helping them with the overall philosophy that the architecture is built for change. So we’re helping them in building that architecture, so that they can exploit and leverage the models as they come in.
Sudhir Guntupalli
Last question from my side. So how do we think of growth given the exit run rate and where our order booking is, and also expectations around some AI-led transformation?
Kunchitham Krithivasan
So as you also mentioned, we have a good order book getting into FY ’27. We have three mega-deals booked in this quarter. And as you also described, most of the industry verticals, we see a positive momentum and our new-age services are also gaining traction. So overall, we are getting into the next year with a lot of positivity and confidence. Thank you. Thank you Sudhir.
Operator
We’ll take our next question from the line of Kumar Rakesh from BNP Paribas. Please go ahead.
Kumar Rakesh
Hi. Good evening and thank you for taking my question. My first question was around what you were just talking about, that getting into FY ’27, we are exiting at a healthy growth. We are also exiting with a bulk of multiple mega-deals and across verticals as well, it seems like demand has started improving, at least growth for TCS has started improving. So would you call out and say that we should start getting back to 3% to 4% growth in the international business where we used to be or better than that, or the recovery is going to be far more gradual this year?
Kunchitham Krithivasan
Kumar, I don’t want to put a number on it. But I would say that, again, as I was telling Sudhir, we are quite positive about FY ’27, quite positive about the international growth.
Kumar Rakesh
Got it. Thanks for that. And my second question was around margins. So SG&A, the second half, has been elevated. So is this the new normal we should now start looking at, or it should normalize back to below 15% where it used to be?
Samir Seksaria
Yes. So as you know, we have been investing on the Build-Partner-Acquire strategy and incremental investments like on partnerships, on recruitment and training, on the new businesses are all reflecting on the SG&A side. So some part of it will see an elevated one, both on the absolute amount as well as a percentage of revenue.
Kumar Rakesh
Got that. And just for a clarification, is restructuring is done or there’s more cost associated to that has to come through?
Samir Seksaria
So if you look at Q4, we have not called out any one-offs. So it is business as usual.
Kumar Rakesh
Yeah, but there is a restructuring charge which you have booked in the quarter, right?
Samir Seksaria
We have not called out any one-offs. So the one-off we had called out was only in Q3 of about INR1,300 crores. Combined for the year, it is INR1,300 crores. No one else can.
Kunchitham Krithivasan
But Kumar, just to get the clarity, I will be specific, the program that we started, we have completed that program. The program towards restructuring has been completed.
Kumar Rakesh
Got it. Perfect. Thanks a lot for that.
Operator
Thank you. We’ll take our next question from the line of Yogesh Aggarwal from HSBC Securities. Please go ahead.
Yogesh Aggarwal
Hi. Thanks. Krithi. Just firstly on the next few quarters, can we expect the similar type of seasonality going forward? Because the reason I’m asking is there’s not been much headcount addition. So the typical seasonality of better first half, does that still work going forward?
Kunchitham Krithivasan
I don’t know what you mean by seasonality. Essentially, we are looking. It is more likely to be a regular Q1, regular Q2 that we are used to seeing is the way we are looking at it as we stand now, Yogesh.
Yogesh Aggarwal
No, Krithi, I was asking, so usually the first and the second quarter are stronger than the fourth, right?
Kunchitham Krithivasan
We are also expecting, our Our planning assumption is along those lines only.
Yogesh Aggarwal
Okay great. And secondly just going back to this AI stuff. So usually in the past, you had all these historically relationships and partnerships with software companies like SAP and all these diamond/platinum ratings. Can you talk a little bit about what are these partnerships with the AI models, especially Anthropic? What is the level of tiering with them and does it really matter anymore? Thanks.
Aarthi Subramanian
No, Yogesh, I think with all the model companies, we are building strategic partnerships. We have announced with OpenAI, we are already working significantly with Anthropic, and will be announcing strategic partnerships with them in the near future. We are very closely working with Mistral. So with all model companies, it’s extremely important for us to build a strategic partnership, but I would say that we are all trying to shape this partnership differently than the traditional GTM partnerships of the past. So we want to make them 360-degree partnerships.
So one is, because of our investment in HyperVault, we have a very unique opportunity where they can become our customers. So you saw the announcement that we made with OpenAI where there is a committed capacity of 100 megawatts and the opportunity to grow that to one gigawatt. So similar conversations are opportunities with these model companies and hyperscalers. So that’s one new pillar of collaboration of strategic collaboration. Apart from that, using their products, ChatGPT Enterprise we made an announcement, using Anthropic Claude. So that’s the second pillar of collaboration. Third is industry-specific solutions with them. The fourth one is again GTM, very specific GTM motions which is very — what you take away from how we do strategic partnerships for the past. So that definitely is a pillar. So this again like I said, we are trying to shape this partnership differently, more deep, more strategic, and value for both.
Yogesh Aggarwal
Got it. Thank you so much.
Operator
Thank you. We’ll take our next question from the line of Nitin Padmanabhan from Investec. Please go ahead.
Nitin Padmanabhan
Yeah. Hi. Good evening. Thank you for the opportunity. Krithi, initially you mentioned some caution in BFSI during the quarter. I just wanted your thoughts on how clients are actually thinking about spending going forward, considering the macro. Do you think this ends up like last year, where you had the Liberation Day, and we thought we were probably getting into good start, but then you had all these headwinds. So in the context of what you see today, what are the conversations with clients? It would be great to have your perspective there, maybe across a few key sectors at least.
Kunchitham Krithivasan
See, what at this time, if you look at our direct impact from the geopolitical situation, so far has been restricted to Middle East and to some extent to our travel and transportation industry. And we have not seen major impact in other industries so far. But Nitin, as you would know, if things continue and if it leads to further supply chain disruption or any other secondary issues, it may have an impact. But at this time, I think the impact will be limited to our travel and transportation and probably the work we do in the Middle East. And we have not been hearing any other specific concerns from our clients in other industries or other geographies.
Nitin Padmanabhan
So the question that you mentioned was very geo-specific. It’s not a broad-based caution.
Kunchitham Krithivasan
And also, yes, that’s correct. Yeah.
Nitin Padmanabhan
Sure, perfect. That’s very helpful. The second is, from a margin perspective, how should we think about margins going forward? Because on one hand, you do have the currency giving you a tailwind, and on the other side, you have to invest on capabilities and multiple other things. So just how should we broadly think from a margin perspective as we get into the next year?
Samir Seksaria
We are exiting FY 2026 at a four-year high on annual margins at 25%, and we see continued positive momentum. Our focus will be to ensure growth with profitability. So we’ll not be shying away from making the right investments for ensuring strategic growth. So if we look at stepping into FY 2027, the immediate headwinds would be the annual increments which we have talked about. And also, as you rightly mentioned, we’ll continue our focus on the build, acquire, and partner framework, and investments around that would be part of it. While some of those we would want to mitigate to better our operational rigor in terms of the usual levers, which we have called out, and also look at optimization on some of the non-employee expenses. And as you rightly called out, the rupee depreciation does help, not guaranteed always. Overall, we’d want to balance it and keep within a tighter range. We’d like to move towards ’26, but on a longer-term basis.
Nitin Padmanabhan
Perfect. That’s helpful. Just one last from my end. Overall, coming out of last year and getting into the next, do you believe that all known client-specific headwinds are behind, and we should see better revenue accretion from deal wins and from a deal win momentum perspective as well? Or do you think that that is on an accelerating trajectory? That’s the last one. Thank you.
Kunchitham Krithivasan
Like, by and large, most of the headwinds we know probably are behind us, excepting few that may come up or that we have already accounted for. But at this time, we are not expecting — of course, nobody can predict what will happen down the line. But I think most of the issues are behind us.
Nitin Padmanabhan
Thank you so much, and all the best.
Operator
We’ll take our next question from the line of Vibhor Singhal from Nuvama Equities. Please go ahead.
Vibhor Singhal
Yeah, hi. Thanks for taking my questions. Just two questions from my side. One is, Krithi, we mentioned our AI revenue to be around $2.3 billion annualized. So that’s basically almost 6.5% to 7% of our total revenue. So just wanted to basically understand, if I were to draw a parallel to the last digital cycle, there also, I think after a certain stage we had started quantifying our digital revenue and the way we saw that cycle play out is that initially there was cannibalization of revenue, and at the same time, we had growth from the digital revenues. And gradually the growth from the digital revenue was able to more than compensate the cannibalization of revenue. Are we seeing a similar trend this time?
Do we expect a similar cycle to follow this time also? There are productivity gains that we are passing on to the clients because of which we are losing out revenue? On the other hand, your $2.3 billion is going to grow much more strongly. And at some point of time in the coming quarters, we’ll probably reach an inflection point. Is that a good way to look at the GenAI cycle? How similar or different would it be from the last cycle? That would be really helpful.
Kunchitham Krithivasan
Broad structurally what you’re saying is correct. I don’t know whether it will be the same time period in which the whole thing will change, but otherwise, structurally, what you are saying is correct. You would expect the AI revenues to increase. You would expect some of the traditional revenues to slowly taper down, and AI revenue to overcompensate for the reduction in the revenue in other parts of other service lines. But the timelines probably can vary. I’m not able to predict the timelines on how all these different cycles will move. Aarthi, you want to add?
Aarthi Subramanian
Yes. Thank you, Krithi. Vibhor, if I may just add to that. When you look at, if you have to compare to the digital transformation that you alluded to, where is the transformation budget, right? Largely bucketed as AI going, right? There are three buckets.
Vibhor Singhal
Okay.
Aarthi Subramanian
One is enterprise transformation. There is still a lot to be done on digital, which is still to be done in companies, whether it’s cloud adoption, migrating to cloud, data modernization, cybersecurity, enterprise systems upgrade, whether it’s S/4HANA, Salesforce. So all those are ongoing, right? So that’s a transformation bucket.
The second one, which is very purely AI-led, is the modernization opportunities that we see. Tech debt reduction was always a priority, but that was always postponed by enterprises because it would take long, it would cost a lot, but I think AI is playing in there and helping customers clear tech debt better, faster. So that’s begun. Long way to go, but that’s the second sector of opportunity.
The third is the pure-play AI transformation, what Krithi earlier alluded to as industry value chain transformation, where you’re really doing AI engagement that create direct business impact.
Vibhor Singhal
Got it, got it. That was really helpful, Aarti. Krithi, one more question from my side. It’s probably more at a strategy level. Maybe you and basically the team can answer on that. If you look at FY 2026, we ended the year at minus 2.4% CC year-over-year decline. If I compare our revenue growth this year with our closest competitor, the difference would be almost 5 to 6 percentage points. That’s probably the widest that the gap has ever been.
But on the other side, our margins are very strong, probably one of the highest margins that we have. And we, of course, remain at the highest margin level in the industry, and we are very strong in margins, while the entire industry is facing a lot of margin pressure. What is the company level strategy at this point of time? We want to continue to focus on the profitable growth part.
Have we ever discussed about that? Should we be ready to compromise a bit of margins to maybe boost growth? What is the direction in which the board and management is thinking in terms of balance between a better growth and…
Kunchitham Krithivasan
Vibhor, I get the question. One, fundamentally, we believe our focus on margin is not affecting our revenue growth. Of course, at the same time, in fact, we believe a good margin we have gives us greater flexibility to approach new deals and be more competitive in gaining market share. And we have been able to prove that time and again. It’s not that we are not growing. We don’t lose deals on pricing. We work with our customers. We ensure that we give the best solution. And we’ve been able to win deals. And so, this is our overall thesis. We believe margin and growth are not conflicting with one another. We should be able to do well on both. And we continue to stay close to our customers. We continue to invest. The margin we have helps us to invest. Like what you saw in the last two acquisitions and investment on HyperVault. They are all possible because we are able to generate margin and it gives us the ability to invest for growth. So we don’t believe these are at loggerheads with one another.
Vibhor Singhal
Got it. Thank you so much for answering my questions, and all the best.
Operator
Thank you. Our next question is from the line of Ashwin Mehta from Ambit Capital. Please go ahead.
Ashwin Mehta
Hi. Thanks for the opportunity. So one question from Samir, what is the impact of wage increments that we see in terms of our margins next quarter? And secondly, any color in terms of this deal flow that we’ve announced, which is pretty strong, what is the renewal share in terms of that, given that there are quite a few deals in the press release where we have extended our relationship with these clients?
Samir Seksaria
So on the wage increments, you should expect a similar thing on what we have seen in the past annual increment cycle, which has been in the range of 150 to 200 basis points.
Kunchitham Krithivasan
Ashwin, in terms of color or the characteristics of the deals or TCV, I would say like about mostly like a 50/50 or 45/55 in terms of between renewals and new programs. So I think this quarter maybe about 50% to 55% could be on renewals, around 40% to 45% would be on new programs. And this varies typically in a smaller band, between 40% to 60% band. It varies one way or other.
Ashwin Mehta
Thanks, Krithi. And just one follow-up. In terms of deals, are you seeing early renewals wherein vendors like yourself as well are going in for early renewals or the deals are largely getting renewed on time?
Kunchitham Krithivasan
Surely. By and large on time, but when we also see opportunity to go back to a customer and ensure that there’s really a renewal can be done with greater AI infusion, greater productivity delivered, and at the same time, with the expansion in scope. We do go to the customers, and we offer to renew early if they are also, whenever we see value and whenever it’s mutually beneficial, Ashwin.
Ashwin Mehta
Thanks, Krithi. Thanks, Samir, and all the best.
Operator
Thank you. Our next question is from the line of Rishi Jhunjhunwala from IIFL. Please go ahead.
Rishi Jhunjhunwala
Yeah, thanks for the opportunity. I think my questions have been answered, but maybe just a quick clarification. Just if we think about your thought process around wage hikes, right? So we’ve deferred it twice in the last five, six years, since COVID. This time we have reinstated it after when we announced it in September back to the April cycle. I just wanted to understand what’s the thought process behind that, given that the overall demand environment, the supply side environment, and the macro uncertainties largely remain there, and haven’t seemed to be changing materially over the past six to nine months.
Kunchitham Krithivasan
Rishi, it’s a reflection as a first is we want to ensure that we properly reward all the associates who have been working tirelessly for us. as you know that while in September we were able to give increments to 80% of associates, the senior executive associates we did not give at that time. So we wanted to ensure that when we restart our increment cycle, we reset it and start for everyone. But it’s also a reflection of the fact that we believe that we have enough deal momentum and demand on our side so that we’ll be able to handle the increased wage cost, wage bill, because of increments.
Rishi Jhunjhunwala
Got it. And one very quickly, while you’ve started giving annualized AI revenues, would it be possible to throw some color on AI deals as well, just to get some sense of how those are progressing?
Aarthi Subramanian
So Rishi, if you look at it, AI deals are, I would say, of two kinds. One is many of the mega deals that Krithi spoke about today. So they have a significant amount of AI embedded into them in terms of how we deliver the service, also in terms of how we transform clients’ business, right? But apart from this, when we are saying AI revenue, we are only calling out the specific AI for business transformation revenue, which we said has exceeded $2.3 billion on an annualized basis. And when you look at the nature of programs, it’s across industries, across markets, and we see that a lot of these programs are rapid build, 12 to 16 week delivery type of solutions. These are high impact problems that the customers are choosing that we can deliver in faster cycles with forward deployment engineers. So that is included. Some of the AI modernization I talked about, which is starting to gain momentum, is all included as part of that.
Rishi Jhunjhunwala
Understood. Thank you. All the best.
Aarthi Subramanian
And one last thing is agentic BPS, which I missed talking about. I think that’s something which is gaining traction, right? Agentic AI in business process services. And we see that earlier in FY 2025, the time taken to implement AI in business process versus this year, we are seeing faster adoption cycles from customers because customers are more confident now putting AI into production. But obviously, with all the guardrails, focus on security, governance, and all of that.
Operator
Thank you. Our next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.
Gaurav Rateria
Hi. Thank you for taking my questions. I have two questions for Krithi and one for Samir. My first question for Krithi is your comment that you made on the growth in the clients’ band of revenue bands in mid and large size, and you talked about stability returning. Is this due to a lower leakage compared to the past, or is it more led by better macro, which is improving the spend in these accounts? The second question is on AI. If you keep the macro aside for the moment, would you expect the new AI services to be accretive to revenue growth in fiscal ’27, net of all the deflation that you see in your renewals existing business? Or is it too early to confirm any such trend?
And the last question for Samir is that AI for business, when you look at the revenue productivity and the margins in that portion of the business, how does it compare to company average? Is it better? Is it in line? Is it lower? Thank you.
Kunchitham Krithivasan
So, Gaurav, first on the client metric improvement. See, it’s a combination of all the factors because you will not be able to grow if there’s no stability or there’s no revenue coming in. Essentially, it’s a reflection of the fact, overall at a high level, the clients are more comfortable in getting into larger transformation programs or some amount of discretionary spend improving. And of course, it’s also possible there are some cases of vendor consolidation happening where you gain market share. But definitely it indicates there’s a stability and more confidence from the clients as well. And for your question about AI, again, our expectation is AI will be net accretive. Initially, our attempt would be to ensure that — arrest the degrowth while the AI revenue increases.
But of course, over a period of time, AI revenue or AI-related revenue, because it will become very difficult to classify after some time on what is AI adjacent revenue. But ensure that they all grow, they will expect them to grow much faster. At that time, the deflation in the other part may not matter materially. Like same cycle, whatever happened during the digital transformation cycle, that trend will resume.
Samir Seksaria
Gaurav, on the AI and data part, the revenue productivity is definitely much better than the TCS average or the traditional business, both at onsite and offshore. Margin, I’ll not call out because there would be investments which would be temporary or in the initial phase, so it wouldn’t like to provide.
Gaurav Rateria
Thank you very much and all the very best.
Kunchitham Krithivasan
Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments. Over to you.
Kunchitham Krithivasan
Thank you, operator. We are very pleased with the continuous revenue growth momentum we have seen in the last three quarters. In Q4, our revenue grew by 1.2% quarter-on-quarter in constant currency with an operating margin of 25.3% and a net margin of 19.4%. We had a very strong TCV of $12 billion in Q4 with three mega deals. Annualized AI services revenue crossed the $2.3 billion. We remain dedicated to our goal of establishing ourselves as the world’s premier AI-driven technology services provider. Our robust five-pillar strategy, combined with sustained investments across infrastructure to intelligence, continues to advance this objective. I extend my appreciation to all TCS employees for their unwavering commitment and professionalism, which has been instrumental to the company’s continued success. This concludes our call today. Thank you for your participation. Thank you.
Sudeep Kunnumal
Thank you.
Operator
Thank you members of the management. On behalf of TCS, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.