The third-quarter earnings of Tata Consultancy Services (TCS) and HCLTech show diverging trends on artificial intelligence (AI) revenues for the IT majors as both scale up the next-gen technology integration into their business models.
While AI is already feeding into revenue growth and margin expansion at HCLTech, it is playing a more defensive role at TCS – stabilising growth rather than driving acceleration, according to analysts.
“Large-scale AI transformation and legacy modernisation are emerging as key growth drivers,” analysts at Nuvama said in a note.
The firm’s advanced AI revenues grew 19.9% sequentially, led by agentic AI and AI foundry programs. HCL Technologies announced $146 million in advanced AI revenues for the December quarter. Analysts at Centrum added that deal momentum remained strong for the company and AI-led bookings are supporting revenue visibility into FY27.
For TCS, which has a significantly larger revenue base, the role of AI-led revenues–at $1.8 billion on an annualised basis–is more stabilising for the moment.
“AI services revenue for Q3 stood at around $450 million,” Emkay analysts said, adding that they helped support pipeline momentum.
Experts at Nuvama agreed, adding that while AI momentum continues, growth is expected to remain gradual and dependent on execution of deal wins.
Monetization and Scaling Strategies
Analysts further said the divergence is less about capability and more about how AI is being monetised and scaled. HCLTech has embedded AI across engineering, services and software, enabling faster revenue conversion and operating leverage.
At TCS, AI engagements are still largely concentrated in short-cycle, RoI-led projects that improve efficiency and support margins, but don’t yet alter the overall growth trajectory.
Scaling of AI revenues at HCLTech is already visible in operating performance, with margins expanding sequentially despite wage hikes and restructuring costs, analysts said, adding that AI-led deals are no longer confined to pilots or discretionary budgets, but are increasingly part of core transformation mandates.
With AI revenues being increasingly embedded across services, engineering and software, they are seen as supporting superior bookings and medium-term revenue visibility. This integration also allows HCLTech to translate AI demand into revenue faster than peers, analysts said.
Revenue Quality and Market Resilience
At TCS, AI revenues have also reached a meaningful run rate, but their impact is diluted by the company’s scale and delivery mix. As a result, it is improving revenue quality and pipeline health, but has not yet triggered a growth inflection.
“The improving demand environment in Q2FY26 extended into Q3, marked by a steady rise in RoI-driven, short-cycle AI projects across industries,” analysts at Emkay said.
These projects are helping TCS offset softness in discretionary spending and support international markets, but analysts caution that acceleration will depend on deal ramp-ups rather than AI volumes alone.
This divergence feeds directly into the outlook. For HCLTech, analysts expect AI-led deal conversion to continue driving relatively stronger growth and margin resilience into FY27, even as macro conditions remain uneven. For TCS, the outlook is steadier rather than aggressive, with AI reinforcing stability and supporting a gradual recovery rather than leading it.
Shares of TCS rose 0.99% on Tuesday to end the day’s trading at `3,267.6 on the BSE, while HCLTech dipped 0.25% to end at `1,663.9. Both companies announced their December quarter results on Monday after market hours.