Annual revenue growth has dropped to 2.4 per cent. Could you discuss that?
Are we happy with the year-on-year decline? Not really. But at the same time, if you look at it, the decline happened because of the impact in the first quarter of the year. After that, we have grown every quarter. This is our third consecutive quarter of positive growth. That gives us confidence that this momentum will continue into FY27, making it a better year than FY26.
You are also saying the worst is behind us. What does that mean for discretionary spending? What are clients saying? Are things changing?
We are seeing greater confidence among customers in committing to projects and starting new ones. Discretionary projects are definitely picking up. At times, even cost optimisation projects are being initiated because, in today’s environment, discretionary investments often need to be funded through other savings.
We are seeing those projects start as well. Overall, customers are showing greater confidence in signing up for new initiatives. This is also reflected in the total contract value (TCV) — for instance, the quarter included three mega deals along with a significant number of large deals. All of this gives us confidence that the headwinds may be behind us.
You mentioned multi-year deals are back. Is the composition of these deals different, considering AI is a focus area?
Large deals will always be a mix of multiple things. There will be components of cost optimisation as well as transformation. They will all be together. All three deals we signed are expending; two are expansions of what we are doing and the third has higher net new revenue compared to renewals.
But, we are committing a transformation to our customers. So large deals will involve both optimisation and transformation. And smaller deals tend to be more transformative or more investment-oriented in nature.
TCS is adopting tools from Anthropic and OpenAI. Once implemented, these tools can automate processes that partners like you currently do. What happens if these tools get embedded and start learning how enterprises function? Do you see this as a concern?
We are not looking it as a concern. Let me explain.
First, let us take a long-term view. Every time a transformative technology has emerged, there has been a fear that it will take away jobs. But historically, what happens is that while productivity increases, the overall volume of work also increases significantly.
Whether it was electricity or steam engine, these technologies expanded economic activity, leading to more work, not less. So, philosophically, we believe that in the long run, this will increase economic activity and create more opportunities.
In the medium term, where does the concern come from, especially for system integrators? The concern is these tools will make software engineering more productive. Let us assume productivity improves by 20-30 per cent. Even if it improves further over time, initially, enterprises will still need system integrators to help realise these gains.
What we are hearing from CIOs is that any capacity freed-up will be used to address the backlog of technology work accumulated over the years. Many organisations have not been able to address this backlog due to capacity or budget constraints. So we expect this capacity to be redeployed into transformation initiatives and technology upgrades.
The second aspect is technology debt. Many organisations, especially large banks, still run on legacy systems like mainframes. These systems pose certain risks but also create opportunities for transformation.
The third aspect is decision-making around AI itself. Enterprises need to determine which large language models (LLMs) to use, whether to adopt a single model or multiple models, whether to combine LLMs with smaller models, and who will fine-tune, train, test, and build agentic layers on top of these systems.
This creates an entirely new set of activities. We see multiple new areas where we can contribute.
So you do not see increased adoption of these tools reducing the need for system integrators?
On the contrary, it increases the need. There may be pockets where productivity improves significantly. But as productivity rises, organisations will demand deeper insights — something that still requires human expertise.
So, yes. AI usage will increase, particularly in systems of engagement and analytics. System integrators will play a key role in helping enterprises adopt and scale these technologies.
On the analyst call, you mentioned TCS has finalised locations. Can you share more? Will OpenAI be your first client?
We have partnerships in place, including a deal with AMD. We are currently finalising specifications. Once those are locked in, locations will be decided.
Some customers have preferences when it comes to land or location. It is not going to be a single location with a 1-gigawatt setup. It will likely be spread across four-five locations. This will depend significantly on customer preferences.
In some cases, particularly hyperscalers, there are specific location requirements. Sometimes they prefer to be close to their existing infrastructure, and at other times they prefer some distance.
I would not comment on the first client yet, as discussions on specifications and design are still underway. As mentioned earlier, we expect revenue from Hypervoult starting CY28.
What is the fresher hiring target for FY27? Why has subcontracting increased?
Last year, we hired around 44,000 trainees. This year, our HR team has already rolled out 25,000 offers. We will continue to assess demand as the year progresses and calibrate hiring accordingly.
Offers will continue to be rolled out — we are already making plans to hire more.
I would not want to comment on the final number, but it will be aligned with demand.
Subcontracting is often driven by immediacy. Sometimes requirements need to be fulfilled very quickly, whereas in India, there can be a lead time of three to four months before a full-time employee joins. Subcontractors can come in earlier, so we use them in such cases.
In fact, this can be seen as a positive, as it reflects underlying demand.