Let's begin. TCS's quarterly results are out, and as always, to discuss the numbers we have with us TCS's CFO Samir Seksaria and COO Aarti Subramaniam. Both of you are joining us. Welcome to both of you.
Thank you for taking the time for CNBC-TV18.
You know, Samir sir, when the numbers came out, I was in the office. On the face of it, it looked like TCS delivered exactly the muted numbers the Street was expecting. But then I realized, when I looked at the internals of the release, that actually this time some hopes are being rekindled. For instance, there was a great jump in international revenues. Deal wins — well, your run rate has been strong for the past several quarters. AI's contribution is improving. I'll touch upon that first and then move ahead. Historically, whenever we came to TCS in Q2 and had a conversation, we were told that it is the strongest quarter for IT companies. But in constant currency, this time again, it's a modest 5% quarter-on-quarter jump. Yes, but international revenues this time are around 1.2%, a jump from 1/4%. Why this differential? Were there any regional issues? What happened here?
Let me give you the split of the results. As you rightly said, international revenues came in at 1.2%, and a significant contribution to that came from three big verticals. BFSI — its growth is accelerating; it grew sequentially by 2.5%. Manufacturing growth is good at 3%, and Tech and Services also has good growth. Because of this, overall international markets came in at 1.2%. If you look at geographies, the UK led the growth. All geographies other than India grew, which is at 1.2%. If you look at India, there is seasonality in it. That is why we call it out separately as regional markets, and we have always been doing that. But overall growth momentum has continued for five quarters now. We have been growing sequentially for five quarters. And AI, as you know, has seen an increase of $500 million in annualized revenue sequentially. So all in all, I think it is better than muted.
That is why I used the word — at first I felt it was muted, but later when I saw the international revenues, it felt good. India, when classified separately as a region, has its own difficulties. What are those difficulties? Is it only because the BSNL deal has peaked, or is there another reason?
No, there is no such reason. Overall, if you see, there is always volatility in India. Seasonality comes in Q3. Because of BSNL — the BSNL deal was completed about a year back. Now a new deal is to come; its delivery will start from the next quarter.
Aarti ma'am, the deal wins are great in themselves. Last time too we were discussing. It was largely expected that this time again TCS would deliver $9 to $10 billion, and you delivered $9.6 billion. Last time you had said not to look only at absolute deal wins. One should also do a qualitative analysis of the deal wins. What kind of transformation deals are there? What kind of AI flavor is there? I used the wrong word — 'tadka'. How much is AI-led? What does this quarter's qualitative analysis say? What is the mix?
No, no, I think this time too the deal wins have been good. You saw the TCV — we have sustained it at $9.6 billion. And in this TCV, the two deals we had announced — the Porsche deal, about which we made an announcement last quarter, and the Best Buy deal — are not included in this. I wanted to call that out first. Okay? So these deal wins have been very strong at $9.6 billion. And they have come across all services — in AI, in enterprise transformation, infrastructure projects, like the big deal we signed with RL Bank, which we had announced through QTS. So all these are good, and then if you look at manufacturing, quite good deal wins are coming. Enterprise transformation, then engineering, then industrial transformation — the transformation that can be done inside plants with AI and digital technology. So all verticals have seen good deal wins. Across service lines, deal wins have come. So this momentum continues, and these Porsche and Best Buy deals are very unique deals.
This Porsche is not included this time. When, according to you, will it start contributing to revenue? That was a €1.25 billion deal. But perhaps the potential of that deal is much greater than that. Have you done any back-of-the-envelope calculations?
No, first of all, we have made the announcement, and right now the closure process is going on, which will conclude in Q3. So the work on it will start from Q4. This Porsche deal is very unique. It is very important to talk about it because this deal is starting with a joint commitment, where Porsche and TCS together are saying that we will do Porsche's complete AI transformation. So this deal has been signed on the foundation of the AI transformation commitment. From this, the blueprint and playbook we will build for automotive, we will take to other customers as well.
Right. Last time we had another discussion when I raised a question that we sign such significant deal wins every quarter, but they are not translating into revenue. Then you had said there is a lag, and once a cycle starts, it will run. Has this 1.2% international revenue jump — has that cycle started?
It has started. As you may recall, we had discussed SKF, and before that ABB. So whatever deal wins happen, there is a transition, and then revenue starts kicking in. So Porsche is special for many reasons. It is an important deal for many reasons because, you know, the five-year commitment that has been signed and the nature of the work we will do with them will be very world-leading. Then I would like to talk about the second deal, which is Best Buy, because we have been talking about GCC for many quarters and years. We did that last time too. So if you remember, last time I had said that from setup to reverse transition, where we will take an existing GCC and make it AI-enabled, we want to do the full life cycle. That is our strategy. This Best Buy deal is the first of its kind, where we are going to take an existing GCC and do a complete AI-enabled transformation for the customer. So this is also a very unique deal from a GCC strategy, and you know, such deals will create many more opportunities for us going forward. Then the other large deals — the large deal momentum is going absolutely like the last quarter.
And for the past two-three quarters we have been discussing that AI's revenue contribution is great this time. It has crossed $3 billion. It appears to be reaching 10% plus of total revenues. These AI deals you are backing, Samir sir, are these brand-new technology deals, or is it a reallocation of existing IT spending from the same budget?
So, see, overall the customer's focus is on AI transformation projects, and they are prioritizing their spend to be on that. And overall, enterprises are trying to keep the IT budgets similar, but our focus is to help them optimize on the existing spend and help them invest into the new where they want to spend on AI. And if I may give a little more explanation on this topic — see, what is happening is that in enterprises, the transformations that are happening where AI is being used — right now, in any enterprise there are systems that are old; there you are transforming and putting in new systems. What will you do there? Because AI is available now, the way you will build those systems is not the way you used to do that transformation three years ago. So in enterprise transformation, AI transformation is happening a lot — whether it is SAP, Salesforce. In manufacturing, PLM, MES — the plant systems — all of that is happening. Okay? The second thing is modernization, where there are mainframes, old technologies, old claims systems, mortgage systems — their modernization is happening. The third is very interesting and is happening more right now: when customers are seeing that problems can be solved in a new way with AI. There, the projects and programs start with a business outcome, not with IT. They start with the business. So our teams do workshops with the business to figure out what the problem is whose solution will create value. The project starts from there, and with forward-deployment engineers, those projects — as I said last time too — are delivered rapidly within three, four, five, six months. The fourth is business process operations. This is transformation. The second thing you asked — where we do engineering or IT operations in our service delivery, AI is being used there as well. That is where the productivity and efficiency play is. Elsewhere, it is a growth and efficiency play.
