Tata Consultancy Services Ltd (TCS), India's IT bellwether, is aggressively scripting a new growth narrative. Faced with investor scepticism and stock underperformance, the company is deploying a multi-billion dollar strategy involving mega acquisitions, massive infrastructure bets, and a sharp focus on artificial intelligence to transform its future.
A Flurry of Strategic Moves
In a dramatic shift from its perceived conservative posture, TCS has announced a series of high-stakes initiatives within a short span. The most significant is a $6.5 billion commitment over six years to build 1 gigawatt of data centre capacity, marking its biggest strategic pivot. This move signals ambitions far beyond traditional IT services.
Adding to this, on 10 December 2025, TCS agreed to acquire tech consulting firm Coastal Cloud for $700 million in cash. This is its largest acquisition since the company's listing in 2004 and aims to significantly bolster its Salesforce software capabilities. Shortly after, reports emerged that TCS was close to securing a rare $1 billion, 10-year contract from Telefónica UK, potentially ending a nearly two-year drought in billion-dollar deals.
Internal Overhaul and Analyst Sentiment
Behind the scenes, a structural leadership overhaul is underway. Under Tata Sons chairman Natarajan Chandrasekaran, newly appointed COO Aarthi Subramanian, and CEO K. Krithivasan, middle-level executives are being promoted. Senior leaders are now mandated to spend at least 90 minutes daily upgrading skills in emerging tech, while service line gaps are being addressed with strict timelines.
This comes after a year where brokerages like HSBC, Motilal Oswal, and Kotak warned of a potential full-year revenue decline—a first in over two decades for TCS. However, the recent announcements have softened some analyst views. Firms including ICICI Securities, Kotak, and Elara Capital have now named TCS a top pick for Q3, citing improving deal momentum and restructuring.
Five Key Challenges for Investors
Despite the strategic push, investor caution persists, evident in TCS's stock being the worst performer among top-four IT firms over six months, declining 4.6%. As Q3 results approach on Monday, Mint examines the core concerns.
1. Macroeconomic Uncertainty: Geopolitical tensions in Venezuela and Iran could delay a revival in discretionary IT spending. A slower-than-expected demand recovery for India's $283-billion IT sector poses a double whammy.
2. Growth Constraints: Post the BSNL 4G deployment completion in 2025, growth has been challenging. The data centre push won't yield near-term revenue, and the Coastal Cloud deal offers only a partial lift. The Telefónica contract and overseas demand recovery are critical triggers.
3. The Gen AI Puzzle: While TCS announced $1.5 billion in annualized AI revenue (as of September 2025), the technology's widespread enterprise adoption is still nascent. Analysts from HDFC Securities note the AI cycle will be more prolonged than cloud, with significant growth expected only from FY27 onwards.
4. Margin Pressure: The capital-intensive data centre strategy, wage hikes, furloughs, and layoff costs could pressure profitability, despite a weaker rupee providing some relief. Maintaining its industry-leading 24-28% margin target will be a key test.
5. Execution Doubts: Concerns have intensified after TCS lost key accounts to rivals like DXC, Wipro, and LTIMindtree due to delivery issues. The rapid-fire strategic shifts—from data centres to AI restructuring and leadership churn—raise questions about strategic coherence and execution capability.
The coming quarters will be crucial for TCS to demonstrate that its future-ready story can translate into sustainable growth and win back the confidence of a wary Street.
