TCS’s AI Math Doesn’t Add Up

India’s IT Bellwether TCS Paints An AI Future Its Books Don't Show

By Dev Chandrasekhar

What?

During the yearly AGM, TCS chairman N Chandrasekaran spoke a lot about AI. He said AI wasn’t a threat, but the biggest opportunity in the company’s history. 

AI, he said, is not a threat to TCS; it is the biggest opportunity in the company’s history. 

By 2028 to 2030, all of TCS’s revenue will have an AI component; and the day is not far when the company will have as many AI agents as it has employees — which today means 5,84,000 of each.

Asked about jobs, the chairman was firm: “There is no downsizing of staff; that’s not planned at all.” 

But the company’s own annual report raises questions about flat dollar revenue, the economics of large-scale AI adoption, a capital-intensive strategic pivot, and whether its plans are keeping pace with its promises.

Why? 

Revenue rose 4.6% year-on-year to Rs 2,67,021 crore in FY26. Sounds healthy, until you notice the rupee fell from 85.44 to 93.92 against the dollar during the year, a 10% slide. 

For Indian IT, which bills its clients in dollars but reports in rupees, a sliding rupee flatters the numbers. 

Reported revenue and margins swell without a single new dollar of business being won, growth that lives in the exchange rate rather than in the order book. 

In dollars, TCS’s revenue stood still at about $30 billion. The celebrated 25% operating margin, the best in four years, also leaned on the weak rupee. 

The chairman admitted as much in the Q&A, saying the currency gave “a net benefit on the top line and the margin line”. 

TCS's AI business is now running at a pace of $2.3 billion a year, up from $1.5 billion two quarters earlier, a fast clip, but still only about 8% of total revenue. The chairman expects it to double every year. But it is still only about 8% of total revenue. 

Which begs the harder question of how much of it is new money and how much is old work with a new label? 

Clients buy AI to spend less on IT services; therefore, AI revenue can grow impressively while total revenue goes nowhere. In dollar terms, that is exactly what just happened. 

The workforce story has the same problem. 

Why Does It Matter? 

is the bellwether of India’s largest services export industry, the business model that built a middle class on the simple trade of Indian talent at global prices. 

AI reprices that trade. 

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Rs 7.60 lakh crore

That's the annual turnover of the Indian auto component industry in FY26, up 12.7% year-on-year, according to the Automotive Component Manufacturers Association of India (ACMA).

Growth was driven by higher vehicle production, sustained investment in capacity and technology, and steady exports. The sector has more than doubled in the last five years, growing at a 17% CAGR.

The Lead: Exports rose 5% to Rs 2.12 lakh crore, led by Europe, while imports grew faster, up 13%, to Rs 2.24 lakh crore, with China, Japan and Germany the top sourcing markets, keeping the segment in a trade deficit.

Future: ACMA President Vikrampati Singhania said the outlook remains positive on domestic demand, FTAs and global sourcing, though rare earth magnet availability, logistics costs and raw material volatility need continued attention.

Trump Warns Iran

A Qatari LNG tanker was struck near the Strait of Hormuz on Tuesday, the latest attack to test a fragile US-Iran ceasefire, as US President Donald Trump warned Washington would either reach a deal with Iran or "finish the job," Reuters reported.

Context: The Al Rekayyat, owned by Qatar's state shipping company Nakilat, was hit about 8 nautical miles east of Limah, Oman, in what security consultancy EOS Risk Group classified as a drone or missile strike, triggering a fire, Bloomberg reported. It is the first Qatari LNG tanker attacked since the West Asia war began. A second LNG tanker, Al Areesh, appeared to turn back before reaching the strait after news of the strike.

European gas prices rose as much as 6%, and Brent crude ticked higher. Of 25 ships transiting Hormuz on Monday, only three used the US-managed Omani route with transponders on, Kpler data showed.

Forecast: US-Iran talks remain suspended during funeral ceremonies for Supreme Leader Ali Khamenei, killed on the first day of the war in late February, with burial scheduled for July 9. Iran's security council called Trump's threats "delusional," with officials saying Tehran would not respond to the "language of threats," Reuters reported.

FPIs Return To Bank Stocks

Foreign portfolio investors (FPIs) bought $1.54 billion of Indian banking stocks in the second half of June, the sector's biggest fortnightly inflow in 14 months, Reuters reported.

Context: Overall FPI inflows into equities marked a turnaround after four months of selling and record outflows earlier this year, when investors favoured AI- and chip-related stocks in Taiwan and South Korea.

The rebound follows policy support, as the Reserve Bank of India, India’s central bank, extended a subsidised forex swap facility for banks' overseas borrowings, while the government scrapped capital gains tax for FPIs and removed the 20% tax on interest income, effective April 2026. Bank stocks gained 6.1% in June, leading the Nifty 50's 1.4% rise, with HDFC Bank up 7.2%.

Setting: "The worst of the FPI selling is over," Abhay Laijawala of Lighthouse Canton told Reuters, citing steady bank earnings as a potential trigger for further Nifty gains.

India's Eastward Bet

India and Indonesia signed a series of strategic agreements, deepening cooperation in defence, maritime security and critical minerals during Prime Minister Narendra Modi's visit to Jakarta. 

Fast Facts: Indonesia will procure India's indigenous BrahMos cruise missile system and Astra air-to-air missiles, while the two countries will jointly develop Sabang Port near the strategically important Strait of Malacca. They also agreed to collaborate on critical minerals, industrial supply chains and Indonesia-specific electronic voting machines.

The Scoop: "Growing trust between India and Indonesia is strengthening our defence, security and maritime cooperation," Modi said after talks with Indonesian President Prabowo Subianto.

Calling the relationship one of "growing strategic importance", he said the Comprehensive Strategic Partnership forged in 2018 was "taking a new flight today". The defence agreements also strengthen India's position as an emerging arms exporter in Southeast Asia.

Trent Shares Slide

Trent's shares fell 12.4% on Tuesday, wiping out Rs 147.88 billion ($1.56 billion) in market capitalisation in its steepest single-day drop in over a year, after first-quarter sales growth came in below expectations, Reuters reported.

By The Numbers: Trent's standalone revenue rose 19% in the June quarter, below street expectations and Citi's estimate of 23%.

The company added 250 new stores, including Westside and Zudio, in fiscal 2026 and another 20 in the first quarter. Same-store sales slowed to low single digits, while revenue per square foot declined despite a weak base.

Trent currently trades at a price-to-earnings ratio of 102.1x, compared to Shoppers Stop at 72.7x and Aditya Birla Lifestyle Brands at 69x.

Forecast: Analyst Aishvarya Dadheech of Fident Asset Management noted that Zudio's growth had started normalising, creating market doubts about the company's momentum, adding that growth and valuations were not in sync.

Citi said it remained cautious due to weak productivity trends, rising competition and the impact of rapid store expansion.

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On Episode 921 of The Core Report, financial journalist Govindraj Ethiraj talks to Ajay Bagga, Veteran Market Analyst as well as Radhika Rao, Senior Economist and Executive Director at DBS Bank.

• Foreign Portfolio Investors Are Returning To Indian Markets, One Trade At A Time

• The Trend Shifts Within Indian Markets As Financial Stocks Lead The Pack

• How Low Oil Prices And Other Positive Macro Signals Could Help The Economy

• Nato Meet Kicks Off In Turkey 

• India To Supply Missiles To Indonesia And Partner For A Port