Tata Consultancy Services Earnings Call for Q1FY27

0:00 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 touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Miss Nel Sha from the investor relations team at TCS. Thank you and over to you.

0:26 >> Thank you Yashasri. Good evening and welcome everyone. Thank you for joining us today to discuss TCS's financial results for the first quarter of FY 2027 that ended on June 30th, 2026. This call is webcast through 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 sheet and press releases are also available on our website. A leadership team is present today on this call to discuss our results. We have with us today Mr. Dr.

0:58 Kriti Vasan, chief executive officer and managing director. Hi. >> Good evening everyone. >> Miss Arti Subramanyan, executive director, president and chief operating officer. >> Good evening everyone. >> Mr. Samir Saxia, chief financial officer. >> Hello everyone. >> And Mr. Sudep Kunumal, chief HR officer. >> Hello everyone. >> 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 risk that the company faces. We have outlined this risk 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.

1:46 With that, I would like to turn the call over to Kiti. >> Thank you, Nah. Good day everyone and thank you for joining us. I would like to begin by calling out the key takeaways from our Q1 FA27 performance. First, Q1 FA27 reflects continued growth momentum and the strength of our strategic positioning despite the geopolitical and macroeconomic headwinds. Our Q1 revenue stood at 72,275 crores growing 2.2% 2% sequentially and 13.9% yearonear. This is the fourth consecutive quarter of growth. Growth was led by BFSI technology software and services regional markets and products and platforms.

2:31 Second strong book closure and large deal momentum continued. We deliver a TC of 9.5 billion including net new Aled business transformation deals such as $800 million mega deal with SKF sixth mega deal win in the last five quarters multi-million dollar strategic partnership agreement with service now multi-million dollar deal with Europe based Fortune global 50 the third key takeaway is our a services revenue continues to accelerate.

3:08 At the end of Q1 FI26, it stands at 2.6 billion USD in annualized revenue, which is up 13.6%. Fourth, client priorities are increasingly aligned with our focus areas of AI transformation, modernization, cyber security, sovereign flow, platform rationalization, and vendor consolidation. We maintain healthy client additions across 10 million, 5 million plus and 1 million plus revenue banks on a sequential basis. Fourth stood at 24% down 130 bits sequential 130 bits sequentially primarily due to wage hikes. Finally, we advance our infrastructure to intelligence strategy through unique partnerships with frontier companies and new launches. We announced a global premier partnership with Anthropic which gives us yearly access to clock family of models 50,000 licenses a joint GPM campaign co-creation of industry solutions and TCS ion as training and certification partner PCS also became the first GSI partner for Mistral AI. Together, we'll build sovereign and custom AI models for enterprises and establish a dedicated COE for developing industry solutions across BFSA, healthcare, manufacturing and public sector.

4:35 We also launched this year's sovereign secure cloud for Europe directly addressing rising demand from governments and regulatory enterprises for compliant sovereign and a ready cloud infrastructure. This strengthens TCS leadership presence in Europe as citizens prior clients prioritize data residency, operational control and geopolitical risk mitigation. We launched a dedicated global global value and innovation center business unit to help enterprises build, operate, transform or diverse global capability centers. Hyperworld is strengthening PCS market positioning and deepening 360deree partnership with clients and ecosystem partners in Q1 FI27. These partnerships enable two very large IT services deals which were net move for us. I will now invite Samir Riy and Sudi to go different aspects of our performance during the quarter. I'll step in later to provide more color on the demand trends that we are seeing over good day everyone. A quarterly revenue for was 72,275 KS a growth of 2.2% in Tokyo and 13.9% in rupee terms. In dollar terms, revenue was US7,624 million which was flat growth sequentially and 2.7% y that in con currency terms was 40 basis points sequentially and 3.2% 2% year one year. This quarter we have undertaken a refinement of cost categories to address the previously elevated other expenses to provide a clearer view of the underlying cost drivers. This change has no impact on overall expenses or operating margins and prior periods have been aligned for comparability. Prior four quarter comparative details are available in our quarterly fact sheet.

6:39 Operating margins for the quarter was 24%. Declining 130 basis points sequentially. In Q1, we rolled out annual increments for our global workforce which impacted margins by 170 basis points. We strengthened our partnership ecosystem and made targeted investments which we were able to partly offset with 40 basis points of currency benefit and operational efficiencies. Our strong profitability allows us the ability to make significant investments which are aligned with our aspiration.

7:14 We are investing in AI capabilities, talent transformation, partner ecosystems, platforms, domain solutions and go to market capacities. These investments are necessary as flying demand demand increasingly requires integrated offerings across the infrastructure to intelligence AI stack. At the same time, we continue to drive operational rigor through pyramid optimization, productivity improvement, better resource fulfillment, automation, and disciplined cost management. As we have demonstrated in the past, our approach is to not optimize margins in isolation, but to invest in capabilities that strengthen our long-term competitiveness while continuing to deliver industry-leading profitability and return ratios. Net margin for the photo was 19.2%.

8:07 DSO stood sequential stood at 74 days in dollar terms and constant sequentially. Our cash conversion remained strong at 93% of net income. Invested funds at the end of the period stood at 5.3 billion dollars. A capital allocation policy remains unchanged and we remain committed to returning substantial free cash flows to our shareholders while judiciously investing to support our long-term growth aspirations. I'll now invite >> Thank you Sam. good evening. Q1 saw strong growth momentum across our services portfolio with multiple AI transformation wins. AI demand continues across IT operations, software engineering, modernization, business process transformation and enterprise platform implementation. The nature of engagements ranges from AIE optimization to large scale AI native transformation programs. Let me share a few of our key deal wins this quarter. We signed a mega deal with SKS to enable transformation across infrastructure, applications, enterprise systems and business processes.

9:23 The program will help SKS build an AI native enterprise through global process standardization on S4 HANA AIE IT ops and business transformation to drive revenue growth, working capital improvement and predictable IT cost for a large North American utility major. We are transforming a decadel long collaboration into a future ready operating model. The engagement will modernize operations across grid management, customer experience, asset management, workflow enablement while building a scalable foundation with strong AI governance and life cycle management. TCS won this renewal with AI first proposition for existing services and was also chosen as a partner for transformation of the utility major into an AI company. This quarter we also had multiple deal wins in autonomous GBS across HR, finance and customer experience. Agentic operating model is at the core of our customer value commitments in BPS. Agentic AI has rapidly dominated customer conversations this year and is inre increasingly shaping how we design and deliver solutions. With growing adoption, AI governance is becoming a top priority for enterprises. TCS is investing in enabling customers deploy and manage AI securely through our agentic control plane, providing governance, observability, life cycle management and cost control. Let me take you through how agentic AI is being deployed across enterprises for IT and business transformation. AI agents in software engineering, IT operations and technology modernization are becoming mainstream. Enterprises are combining agentic capability from their existing tool investment with contextual agents for providing in for improving productivity and resilience while accelerating time to market as well. For a large retailer, 70 agents are orchestrating IT ops across more than 60 infrastructure and application workflows, integrating with the customers ITSM tools. Continuous 24x7 monitoring and 24x7 operations has shifted from largely human monitoring to AIEL monitoring. The transformation has resulted in 30% faster remediation and 80% fewer incidents. Business process transformation with agentic AI will be a significant opportunity across industries. Enterprises are looking at both redesigning workflows with AI as well as driving process optimization with AI. TCS is building domain specific workflow blueprints and agentic vertical platforms with pre-built agents across industry domains to accelerate business transformation. Let me share an example of how AI agents are working alongside humans to transform worker compensation workflow for a global specialist insurer. TCS has deployed seven AI agents including specialized medical and fraud review agents who are operating alongside human examiners. This human plus AI operating model has cut claim settlement by 40% replacing a legacy process that relies on several sequential human handoffs. The result is faster and more consistent claim operations with meaningful impact on cycle time and customer experience. We will continue to drive focused execution on our infrastructure to intelligence strategy that we announced last year. As all of us know, AI is evolving at unprecedented speed with model capabilities emerging rapidly. We continue to integrate the latest advances into our services, platforms, and solutions in collaboration with our partners. Thank you. I'll now hand it over to Su.

13:35 >> Thank you. And hello everyone. Our workforce at the end of quarter stood at 593,798. This quarter was this quarter we completed the annual salary increments for all associates globally and also aligned salary searches of our India associates with a new India labor code requirements. We continue to build a workforce equipped for evolving client needs to balance talent strategy that combines fresh hiring experience professions and sustained talent development. Our campus hiring continues to focus on digital and AI native talent supported by reimagined initial learning program and stronger AIcentric curriculum. We are investing in the training pipeline and deployment readiness through experiential project based learning while gradually moving towards a more skill ccentric employee pyramid. We're also investing in large scale upskilling and reskilling of our existing workforce. teaches continues to operate one of the industry's largest enterprise learning engines. In Q1 FI27, Associates launched 14.6 million learning hours and gained over 1.3 million competencies.

14:47 Our lateral hiring is focused on domain specific and AI native talent. Over 50% of the lateral hires already possess next generation skills and we expect the share to increase as we continue to build talent depths. Looking ahead, we remain focused on enabling our people to be future ready through investments in AI infrastructure and next generation skill development programs. They committed to fostering a workplace environment where every associates feel safe, valued, trusted and empowered to grow. Thank you and I now hand it over back to thank you Sud. Let me now share details of our key industry performance this quarter. BFSA delivered good growth across geographies.

15:29 Tech software and services continue its growth momentum. We successfully won several large and midsize deals in this segment including a multi-million dollar deal with service. Now the consumer business group the quarter was driven by a combination of inflationary pressures and and ongoing geopolitical uncertainties impacting discretionary spend. In this environment, client priorities are around managing their increasing costs. Growth initiatives remain selective centered on targeted areas that could deliver scalable impact without increasing risk exposure. Life sciences and healthcare saw decline this quarter. How will core demand for AI transformation, automation and compliance initiatives intact recovery is expected soon. Manufacturing continued to show softness in certain segments like auto while decision making was influenced by tariff pressure, macro uncertainty, EV recalibration, supply chain resilience and cost discipline.

16:27 However, our outlook remains positive for manufacturing based on multiple net new deal wins signed this quarter. For instance, we announced a landmark 800 million global aled business transformation deal with SKF for redesigning their enterprise operations around an intelligent digital board. We also further strengthened our collaboration with ABB through a new multi-million dollar future network model management. We also signed a multi-million dollar deal with a global Fortune50 European firm. All of these are completely net new AI opportunity in CMI. The industry headwinds continue to play out. We delivered modest growth in this segment.

17:10 While ERU had a slight decline this quarter, we are passive on the growth prospects of this segment on the back of AI infrastructure buildout, electrification, renewables, energy security and mining grid and mining critical materials. In regional markets, growth was driven by India public and public services and our products and platform. To summarize, enterprises are investing in transformation that improves resilience, resilience, productivity, security and readiness for AI. AI transformation, modernization, cyber security, sovereign cloud, platform rationalization and vendor consolidation are attracting client investments and TCS is favored as a partner of choice for our clients. We are encouraged by the quality of wins, strong client, steady a monetization, relevance of our offering and the strength of our long-term competitors.

18:04 These factors give us confidence that thesis is well positioned to convert demand into stronger growth as client spend normalizes and a adoption scales across the enterprises. We remain focused on execution on deepening partnerships and on building capabilities that position TCS strongly for the ALA transformation cycle ahead. We are confidently marching towards our aspiration of becoming the world's leading a technology services company. We will pursue this aspiration with discipline, responsibility and a continued focus on creating sustainable value for our clients, employees and shareholders. With this, we'll open the line for questions.

18:48 >> Thank you very much. We will now begin the question and answer session. Participants who wish to ask a question may press star and one on their touchtone phone. If you're using a speaker phone, please pick up your handset while asking a question. This is required to ensure optimum audio quality on the call. If you wish to remove yourself from the question Q, you may press star and two. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

19:17 We'll take our first question from the line of Kumar Rakkesh from BNP Paripa. Please go ahead. >> Hi, good evening and thank you for taking my question. My first question was around the demand environment especially from the near-term perspective. So, how did you see the quarter if you could quantify the impact from some of the macro and geopolitical uncertaintities you saw in the quarter and did that picked up during the quarter? you and how do you see that panning out in the September quarter?

19:44 Are there any more incremental impact that you see going into the September quarter? Kumar we called out sometime earlier also whatever factors we saw to see in Q4 we initially said that things were improving but then around March we started seeing geopolitical uncertaintities increase that sentiment continued through quarter and and I think I know whether when will this change because the overall many of the ongoing conflicts are continuing Okay.

20:20 And we also saw many in many many situations or clients wanting to cancel or defer some of the projects during the quarter. So these two have were the effects we saw. But if you ask me overall we are still optimistic that the demand will resume in sometime in Q2 because primarily because our customers have a significant amount of pentup technology backlog to be completed. So I expect the demand to improve sometime in Q2. So we're generally optimistic on Q2 going in at this time.

21:01 Thanks a lot for that. My second question was around the SGNA investments and you have called out earlier as well that you are making investments especially around AI and that line item is up by about 16% in dollar terms year-over-year. So if you could get give us some more granular color what investments we are making over there. Is it sales hiring? If so, in which geography, which areas we are focusing or anything else which we can have a better sense of what areas we are incrementally investing in the overall SCNA which we so one Kumar as we talked about the reclassification we have done away with the split up of PA and SGNA but as you rightly said on SGN from the IFRS the the SGNA investments have have been increasing and like we have been previously reporting it is mainly on the employee side of it and also in terms of the partnerships and targeted investments. This also includes the charge off on the M& side.

22:21 >> Got it. Thanks a lot for that. I'll call back in the queue. >> Thank you. Next question is from the line of Yogesh Agarwal from HSBC securities. Please go ahead. >> Hi. Hi. guys, couple of questions. So firstly thanks for sharing the AI revenues and the details around the AIDS but I think the picture will be lot more complete if you can also discuss the impact.

22:52 So percentage of revenues or the business or the clients has already gone through the productivity pass through and how much is left so is it significant or is it not a large share? So >> your line was not very clear but I'm assuming your question is around any overall revenue deflation because of the productivity gains coming out of a is it right?

23:22 >> Yes. What part of the business has already gone through it? It's difficult to quantify on what see what we can see is as as and when the projects coming up come up for renewal. We find that we work or we find opportunities along with our clients to earn productivity benefits and pass them on to our customers. And also some there are some situations where our associates proactively look at opportunities and go to our customers and say where we can reduce overall spend. But we also have seen in many places whenever we go to our customers with such opportunities customers give us additional work and so that the top line is not significantly impacted. So this is an ongoing process. It'll be very difficult to say whether we are done with all productivity gains are being passed on and what I one quantification I can give you is in most places the productivity gain passed on center is around 10 to 15% range >> right right thank you and just a clarification so Europe and US in particular weak in this which is usually a strong You are saying I'm sorry you're sounding muffled.

24:46 >> Okay, I'll come back and yeah, thank you. >> Thank you. >> Next question is from the line of Sudir Gupandi from Kotak Migra AMC. Please go ahead. >> Yeah. hi Ky, thanks for the opportunity. firstly on the incremental AI revenue added we added $75 million of incremental AI revenue this quarter versus $125 million of incremental revenue added in the March quarter. is there any peculiar seasonality here or was this quarter impacted by vestation conflict or any other matters. the reason I'm asking is we don't have the full time series pattern to sort of understand the trend these we have to yet to understand this a revenue is not like a traditional ADM revenue where there's lot of annuity revenue involved this is something that more many of these projects tend to be one quarter two quarter projects so where we complete and we have to win again new projects and acrew the revenue deliver and acrew the revenue.

25:54 So there would be some some quarters where we would be able to get that this will tend to be little lumpy in terms of the size of the overall revenue that we get. but what we look for is is it continuously increasing and the conversations with our clients are they yielding more opportunities? But we are quite happy with the kind of growth we've been seeing on a quarteronquarter basis because of the non nonrecurring nature of this work.

26:26 And the second question is the latest burst term in the industry is the forward deployed engineers. if we were to loosely equate this, would the role of a product manager in the digital era be a comparable benchmark for the role of an FD? And a connected question is if you were to assess your overall work for workforce so how many FDAs would you count upon in the overall global workforce that you have right now? >> Yeah, Sudep this is here. I think firstly the definition of MDE right is evolving as we speak but within TCS we have come up with a no definition that we are and along with the definition the building of competencies and deployment of those engineers and as you know the FDS work in parts also called squads so the entire operating model around FD is something we are defining and if you look back in the last year since we started delivering in the new operating model with AI we call it innovate with AI build with AI scale with AI which is our AI acceleration playbook that we came up with last year we have this concept of rapid build engineers which is very similar to a forward deployment engineer. The difference being that a forward deployment engineer would have multiple skills but would be very deep on one particular skill sometimes on technical or a domain but works with a a toolkit that the person takes to go and solve a problem. So most of these FD deployments are a different kind of project where you start with a problem that you solve for and then you deploy the squad and the engineers and I would not equate this to the role of a project product manager right so these are specialist engineers who are multi-skilled but deep on one particular skill right we used in TCS we coined a term many years ago as a T factor so which we coined during the digital era and I think the FD fits right quite well into the same T factor capability model and at this time I wouldn't put a number to how much we have because this is a transition period and we are building these skills but going forward we would definitely target to have the definition that we come up with at least 1% of our you know employee base we would want to target to have you know to work in the new operating model but this is not a one-time jump it is a transition we are already working in the FD model with our rapid build methodology but the definition and the operating model I expect it to evolve >> okay ma'am thanks and Ky one last question to your earlier response on the west station conflict impact you said the the uncertainty started in March continued through April, May and June. So if you were to quantify the rate of change given that you are expecting improvement sometime in the second quarter are you seeing that it it would have already peaked and it is a sort of improving the situation on a month-on-month peak only basis. So how would you essentially quantify the rate of change of this dynamic?

30:03 >> I won't say quantify the rate of change. I can only talk based on the conversations we are having with our customers. so for instance we did talk about in this quarter that we expect the life sciences to do better. So some verticals we see there is a stronger uptake visible. So that gives us a confidence and overall conversations that we are having with customers in different verticals is giving us a confidence to it. I don't know whether I can put a rate of change or quantify that at this time.

30:40 >> Fair enough. Thanks and all the best. >> Thank you. Next question is from the line of Nitan Padmanaban from Invest. Please go ahead. >> Yeah. Hi, good evening. thank you for the opportunity. couple of quick one. So one is see last year we had very solid deal win growth in retail and consumer. So well consumer seems to be soft. So is it that those deals aren't converting to revenue or you think that pipeline should start converting to revenue and should lead to some growth as we move forward?

31:19 That's the first there are listen there are multiple factors playing out here. while we did sign large deals, we did have few projects large projects ending also because of the large projects closing. The net addition was what these new projects net addition was ramping up and so we are still not there to completely recover from those large projects. but I think as we as the quarters move along as and as the large projects that we signed up as they start yielding revenue we'll start seeing growth.

31:59 >> Sure. And from a just two questions from a demand perspective. So one is that in the US corporate revenue growth seems to be quite decent and I think consensus expectations on growth for this year on growth overall is pretty broad-based across industries and seems pretty strong. and historically we have seen a very high correlation but this time around it looks like it's not really coming through. So why do you think we are seeing this dynamic?

32:33 is it is it more being attuned to the demand that is not happening or is it there is a real caution on spend but if there is velocity of growth then why should spend be so curtailed is the first question the second question is from a are you cautious on BFSI if I understood your commentary or you think that BFSI continues to do well >> so I think in fact my answer to both the questions is probably so the the growth or lack of if you see the banks are doing very well in US and we also are quite optimistic on the sustained growth in BFSA segment and I did call out retail is one segment where because of the geopolitics which is more when I say retail or consumer business with the airlines and non-essential retail all of them are having a greater impact because of the global geopolitics. Similarly, you have manufacturing. Our manufacturing is a significant auto component and auto is also having a impact because of multiple reasons. So, we need to look at it from a sector perspective and going forward actually as I said BFSI we are looking good.

33:54 manufacturing we believe will turn around in Q2. Life sciences could turn around in Q2. Tech services will continue to grow. So we are quite optimistic on these by consumer business will turn around once we have a better market sentiment on geopolitics. >> Sure. Got it. That's helpful. Thank you so much and all the best. >> Thank you. Next question is from the line of Ravi Menon from Access Capital.

34:26 Please go ahead. >> Hi, thank you for the opportunity. in this environment where the narrative is that white collar employment will decline due to AI and the first catch like Ely software development you know your wage hikes and hiring seem to be sending a signal that you see things differently can you talk a bit about why you given this wage hike and you know why such strong hiring in an environment where at least the narrative seems to be that we will need fewer people to do the sort of work >> really I think Our chairman also spoke during the last AGM. we first of all do not believe that there would be a drastic reduction in employment.

35:11 but people would be doing different things. Right? Currently if they are doing software engineering and coding there could be no new more skill sets required in terms of prompt engineering. People will be training models, testing models and life cycle management. so many other new opportunities would come up. So we are not we don't agree with the view that overall white collar employment will go down and second our hiring is based on our we do proactively we want to have more top top talent available in the organization. So whenever we see opportunity and also whenever there is a demand that could immediately that we could deploy the people in the client engagements.

35:55 these are a couple of factors that help us of the direct us into more hiring. So but again as I said like we don't fully agree that AI is going to reduce the overall white collar jobs. Thanks. And consumer, you spoke quite a bit about it, but any specific subsegments within this that you'd like to call out? For example, airlines are you seeing >> see airlines you definitely is strange stress and we also >> airline North America sorry like my business head was helping me like airline North America is definitely one of the areas and by and large the non-essential retail also comes under stress.

36:42 >> All right. Thanks and from some of it looks like except for the consumer segment you are optimistic that most others seem to be picking up and you know will grow >> as we speak as we speak we see a good turnaround in almost every others >> right thanks so much and best luck >> thank you next question is from Sep Sha from IU security please go ahead >> yeah thanks thanks for the opportunity it is good to see that under a AIE transformation bucket we have disclosed a mega deal with of 300 million from SKF and that to net new versus the market perception that the role of the system integrator in terms of AI transformational would be much lower. So what has led for a client to award such deals to a system integrator and do you believe it can spread to other verticals other large clients and this could be a start of some modernization ground kind of a demand and second with AI transformation I think the tenure of execution would be lower so in this kind of a scenario though it's a mega deal be much bigger versus what it used to be in the early year.

38:09 So u Septi here so let me talk about the mega deal that you called out SKF just wanted to highlight that it's a net new deal and you know it is over 800 million in revenues and I think what is the driver I think it is TCS ability to partner with the customer to really transform transform their business and technology landscape and help them in their ambition to wanting to be a AI first company. I think that is what is the underlying partnership intent if I may call it that. And when you look at this deal, it's a very holistic deal cutting across multiple aspect, right? TCS is going to help SKS completely optimize their run across infrastructure applications with AI, right? So AI efficiencies. The second thing is right many enterprises have legacy test track that they need to modernize. So here S4 HANA transformation is big part of this deal commitment and what is interesting is S4 HANA is not an upgrade. We are going to completely do a process mining of their existing processes use AI to redesign the new process and then execute the implementation with AI. So there are it's a very nuanced AI implementation of S4ANA which is now the latest trend. In addition the we are also partnering with the customers on industry value chain transformation. So netnet across IT business transformation with AI is what we have partnered with the customers for >> and as you know it it's a global you know all the work that we do will span across escape operations globally and we're very excited about this very unique opportunity.

40:21 my question is such kind of a prospects are coming into pipeline across many sectors or these kind of a things are sporadic and second with AI transformation is it fair to assume the conversion of such kind of a mega deal to revenue could be faster because the tenure of the deal could be lower and ACV could be higher. So Sep if you located over the last you know last quarter we intro we you know announced three mega deals. This quarter we have one mega deal. I think in the last two last two quart three quarters or a year we have announced five mega deals right six mega deal sorry. So five quarters six mega deal. So I think and these mega deals cut across industries right and but in terms of the scope I think they have something in common. It has a component of optimizing the run with AI and then partnering with the customer on the business transformation. So it cuts across and I think where the acceleration comes is in the transformation the discretionary projects that are part of the bundle that's where the AI acceleration comes in execution and one thing we are seeing is that compared to earlier how we would do such deals how we bring AI much earlier into the execution whether it's in ops or in transformation AI is part of the day one proposition and execution. So that's and that brings a certain acceleration to the transformation and also to the execution duration.

42:04 >> Okay. Okay. And just a last question with many clients are spending higher than what they budgeted on CI tokens. Is there a discussions happening where client will have hybrid model of LLM where are they open to even use opensource model from a pioneer like deep baser of China and if that happens do you believe the system integrators role will further increase because of the complex architecture of the same >> this we've been saying for a quite some time and we believe like most enterprises is we'll have a will have multiple see one LLM plus many SLMs or multiple LLMs like or within the same family they probably will use a older model for certain queries and newer model for certain workloads. So this will because the model synops will become an important topic for what they would use on-prem model for what they would use a cloud token based model will also change. So this is the area where system integrators have a greater role to play and ensure that the client's money is well spent and the value is delivered to them. So we see this increasing as we go along.

43:29 Yeah, just add I think in the AI world today I across multiple archetypes. So we are seeing you know I would say output commitment based models outcome based models you know where we are committing through the AI program to deliver a business outcome right in a fixed duration. So that's starting to happen and second one I would say is definitely fixed price fixed capacity where you start with a program then once the customer sees value then we actually set up multiple pods like I spoke earlier. So we call it our AI lab offering where that is part of the build and scale. So you build once then create capacity in a fixed price model and then in some cases you do continue to see TNM requirements coming in but TNM does not mean still means that you take you know accountability for delivering the outcomes but all three models we are seeing and especially in u agentic GBS we are seeing a lot more shift especially this quarter to more outcome based commitments.

45:19 >> It has always been transaction based, right? And very less TNM. Transaction and outcome based commitments are increasing in autonomous GBS deals and we saw quite a few of them this quarter in FNA, HR and customer experience. >> All right, this is so useful. Thank you. last question is for Samir. you know I know that you categorically talked about you know prioritizing investments in in the current context of how technology is shifting but you also did mention about you know maintaining our aspirational band on margins on the medium term. So how medium is the medium-term you know from your perspective given given where we are in the you know life cycle of the technology change right now.

46:06 Thank you. So overall go our approach has been to balance growth investments with operating discipline and that that's what we have been doing it consistently we have been we talked about it in our analyst day also we have been reinvesting some part of the gains into things which will achieve our aspirations or long-term commitments and see we have A lot of question given our indust profitability but our aspiration would be to achieve both make the right investments but not you know in closer at least to the FI25 levels.

46:56 >> Thanks so much for the rest. >> Thank you. We'll take our next question from the line of Ashwin Ma from Ambbit Capital. Please go ahead. hi, thanks for the opportunity. the first question is in terms of segmental margins. just wanted to get a sense in terms of why there has been closer to 250 to 300 declines in margins across manufacturing, communications, life sciences and even in others.

47:28 >> Okay. I mean overall see 170 basis points is the impact due to salary increments right and then incrementally there would be some impact coming in at a segment level on specific verticals basis investments they might be prioritizing but the key impact is the 170 basis points which reflects across most of the segments if you mention >> and just a clarification to your answer. Last question. So, so we see the trajectory of margins to go back to our FY20 six margins over the next few quarters or from a fullear perspective we see is to be very close to the the previous year margins.

48:16 >> Usually what happens is we take the big headwind up front in Q1 and we inch up through the quarter. we'd want to exit at 25 plus and achieve it sooner rather than later. sure. And the last question is in terms of pressure addition how many pressures would we have added and what is the plan for the year? So Ashwin last quarter we hired onboarded 14,000 campus grads across and as we speak we are in universities the top universities across the country and hiring for top talent specifically looking for a native skills.

49:02 >> Sure. Thanks and all the best. >> Thank you. Next question is from the line of Abishek Shindar from Incred. Please go ahead. Hi, thank you for the opportunity. at the start of the call, you know there was a mention about productivity which is 10 to 15%. can you just help us understand is this on an ACV basis or a PCV basis and how could should we reconcile this with some of the data points that have been talked you know in other forums that the total 1 trillion spend is going to compress by almost 300 billion dollars over the next few years. Can you just reconcile that?

49:50 Thank you for taking my question. I wish like what I said is like there is a overall productivity we are able to achieve is about 10 to 15% that productivity we are able to achieve from day one when we leverage a for these engagements so you should look at such that productivity gain coming out of any period you have whether it's ACV or even on a annual basis that productivity gain and benefit reduction effort or the deflation in revenue would happen because of productivity and we also mentioned that this usually is compensated by additional opportunities that we generate from the customer.

50:40 the other question on overall contraction it'll be too difficult for me to answer in terms of $1 trillion going in there like at this time we don't see such a massive contraction or deflation happening in the world. In fact you did see that our overall headcount has actually increased this quarter. So we are not seeing that kind of contraction happening in our book book of work with us. thank you. just to follow up wanted to understand that typically the understanding was the productivity could be 3 to 5% annually. so if it's a fiveyear deal is it fair to assume that this number is spread over a five year period every year or how does that play out?

51:31 It al depends on the kind of project and where the how see there are because in every project there are some places in the life cycle that the productivity gain will be better where it will be where not very easy to achieve. So that depends on the type of project in for instance a new software development application development would behave in one particular way monitoring would behave in different way production support will behave in different way so it'll be difficult to say that whether it's what happens in the first year or second year but by and large as I said it's a rule of thumb saying that we can expect a 10 to 15%. But we are seeing that we are able to offer a friend commitment to our customers so that we are able to balance it out to smoon it out through the term project.

52:30 >> this is super helpful sir. Thank you for taking my question. >> Thank you ladies and gentlemen. We'll take that as the last question for today. I now hand the conference over to management for closing comments. Over to you. Thank you operators. In Q1, our revenue grew by 0.4% QQ in constant currency with an operating margin of 24% and a net margin of 19.2%. Annualized AI services revenue crossed 2.6 billion USD. We had a very strong CCV of 9.5 billion in Q1. We remain confident that TCS is well positioned to convert demand into stronger growth as client spending normalizes and AI adoption scales across the enterprise.

53:19 This concludes our call today. Thank you for join Thank you all for joining us. >> Thank you members of the management on behalf of TCS that concludes this conference call. Thank you for joining us and even our disconnect your line. >> Thank you N. Thank you.