TCS sees higher pricing for AI-led deals amid demand revival, says CEO Krithivasan

AI-led deals are commanding a pricing premium and client confidence is showing signs of recovery, TCS CEO K Krithivasan has said.

In an interview to Financial Express, Chief Executive Officer K Krithivasan said the company has delivered sequential growth over the past three quarters after a weak start to the year, even as annual growth in constant currency terms remained under pressure.

“The first quarter saw a sharp decline for known reasons, but since then, we have delivered sequential growth. The order book remains strong, client metrics have improved, and overall confidence levels are better than before,” Krithivasan told Financial Express.

He said clients are increasingly willing to initiate new engagements after a period of caution, signalling a recovery in discretionary spending.

TCS’ direct exposure to West Asia remains limited, with any impact so far largely confined to travel and transportation, he added.

“If the situation escalates and begins to affect global economic activity, it could have a broader impact across supply chains, manufacturing and technology, which may then flow into other sectors. At present, we are not seeing that play out,” he said.

On AI adoption, Krithivasan said the company’s annualised revenue from AI-led projects has risen to about $2.3 billion from $1.8 billion in the previous quarter.

“These are programmes where AI is integral to technology modernisation or embedded in the end solution delivered to clients. We are seeing adoption across geographies and industry verticals,” he said.

AI-led deals are also being priced at a premium compared to traditional contracts, a trend expected to continue, he added.

"AI-led deals are coming at a higher price point compared to non-AI deals, and that trend is expected to continue. In terms of deal conversion and ramp-up, we do not see a direct impact from geopolitical factors at this stage," TCS CEO said.

Drawing parallels with the earlier digital transformation wave, Krithivasan said AI-led revenues are expected to grow steadily over time, even as some traditional service lines may decline.

“AI is likely to drive incremental technology spending, which should more than offset any decline in legacy areas. Over time, the net effect is expected to be positive,” he said.

Chief Financial Officer Samir Seksaria said the company will continue to invest in growth, including AI infrastructure and partnerships, while maintaining a shareholder-friendly capital allocation policy.

Seksaria said a substantial portion of free cash flows will continue to be returned to shareholders even as the company steps up spending on hiring, training, subcontracting and integration of acquisitions.

He also noted that currency movements provided a tailwind during the period, with rupee depreciation against major currencies contributing around 400 basis points to sequential revenue growth and about 100 basis points to margins.