There is space for several giants in the data center industry: TCS CEO K Krithivasan

Tata Consultancy Services (TCS) is in discussions with multiple artificial intelligence firms to set up AI datacentres in India, which has sufficient capacity to host several global players, said chief executive K Krithivasan and chief financial officer Samir Seksaria.

The country’s largest IT services firm is also actively pursuing acquisitions to build AI capabilities and sees the demand environment improving, they said in an interaction with ET’s Himanshi Lohchab and Surabhi Agarwal, after TCS reported nearly 5% growth in third-quarter revenue but a 14% decline in net profit, impacted by a one-time cost related to the implementation of new Labour Codes. Edited excerpts:

How does TCS plan to compete with global hyperscalers such as Google and Microsoft in datacentres?
Krithivasan: We see immense demand for datacentre capacity in India, with room for multiple players. While Google is setting up its own datacentre, we are also in discussions with other hyperscalers and deeptech AI companies looking to establish AI datacentres in the country.

We don’t see this as competition because the ecosystem needs far more capacity. Enquiries have been very encouraging, and almost every known player has discussed potential collaboration with us.

The industry is witnessing revenue cannibalisation due to AI. How is TCS approaching this?
Krithivasan: Whenever we identify opportunities where AI can deliver higher efficiency, better customer experience, or faster throughput, we proactively take those to clients.

Whether that leads to new revenue or short-term cannibalisation is not our primary concern. If it does cannibalise revenue, we believe clients will reinvest the savings into new projects. While it may appear deflationary in the short run, demand should return over time. Not taking a proactive approach would be far more detrimental, as TCS is built on long-term client trust.

How do you see the demand environment in 2026?
We began seeing improvements in demand in the second quarter, and that strength has continued despite the third quarter being seasonally weak.

Our total contract value (TCV) of $9.3 billion is in a comfortable range. Adjusting for seasonality, almost every business vertical has performed well. Decision-making cycles have improved, and that trend continues, giving us confidence.

Is client spending easing, or is uncertainty still holding back investments?
There is still some uncertainty, and customers continue to prioritise cost optimisation deals over fresh investments. That trend remains.

What is encouraging, however, is the increase in AI-led projects, especially where clients can see a clear and quicker return on investment. Transformation projects have also started picking up compared to two quarters ago.

TCS took several bold measures in 2025, including layoffs, acquisitions and entering the datacentre business. What lies ahead in 2026?
In the second quarter, we articulated our vision of becoming the world’s largest AI services company, supported by five strategic pillars. In the third quarter, we doubled down on execution.

We have developed a framework outlining five levels of AI autonomy to help customers measure and balance their AI journeys. We now have a full AI stack—from infrastructure to intelligence. We will continue expanding partnerships and pursue acquisitions where needed to build scale and capability. There is a clearly defined roadmap, and you will see more steps in that direction.

TCS reported a net headcount reduction of 11,151 employees in Q3. What was the hiring picture?
Seksaria: The 11,000 figure reflects net reduction. Gross additions during the quarter were over 15,000 employees. Workforce optimisation linked to reskilling accounted for about 1,800 exits, with some additional involuntary attrition due to performance.

Attrition rose by 20 basis points quarter-on-quarter. We are comfortable with our hiring levels and continue to recruit trainees, as well as talent from the US and other overseas markets.

How is TCS restructuring salaries to comply with new Labour Codes? Will take-home pay be affected?
We have implemented the changes in line with legal guidance and external counsel advice. Some restructuring of salary components has been done, and we have taken a provision of around Rs 2,000 crore for past service costs.

We do not expect any reduction in take-home salaries. This is purely a rebalancing of components, and no employee’s salary will decrease.