Chandrasekaran, or Chandra as colleagues address him, underlined the underperformance of TCS in the stock market, according to two executives present at the event. In his 30-minute keynote address, the chairman used a PowerPoint slide to show that the shares of the Tata Group’s 26 publicly listed companies were up 270% between 2020 and 2024. Barring TCS, the shares of this cohort were up over 530% in this period.
Chandra went on to lament that TCS was still not a leader in artificial intelligence (AI) and that the company was still not realizing its potential, the executives said.
The chairman’s message was clear: TCS needed to shape up.
How the company performs is crucial to the Tata Group—TCS is the crown jewel accounting for about 84% of parent Tata Sons’s total income in 2024 and 41% of the combined market capitalization of $365 billion, as on 31 March 2024.
Chandra’s address in Dubai came less than a fortnight after another development, one that highlighted his increasing concerns about TCS. In the first week of February, close to a dozen senior executives presented their performance and goals. This annual exercise was not just reviewed by the chief executive officer, K Krithivasan. Chandra was present, too. The chairman reviewed the IT company’s senior leaders for the first time since he moved to Bombay House, Tata Sons’ corporate headquarters, in February 2017.
“This is the first time the chair reviewed individual business unit heads,” said the first executive mentioned above. “Classic Chandra style,” commented the second executive, adding the review meeting was over 75 minutes long. “Sharp and prodding us to set larger goals,” the executive said.
“The chair did the reviews, expressed his unhappiness at our performance and AI-readiness, and appointed two leaders to assist the chief executive officer (CEO),” said a third executive.
None of the three executives wanted to be identified.
TCS declined to comment on a detailed questionnaire sent on 6 May.
The replay
Kritivasan took over as the CEO on 1 June 2023 after Rajesh Gopinathan resigned in March that year. Gopinathan had taken over from Chandra in February 2017 and was given a second five-year tenure in October 2021.
Back then, Chandra had expressed his dismay at the company’s performance, in a near replay of the developments we described above. On 16 November 2021, Mint reported that the Tata Sons chair had expressed his disappointment at TCS’ slow growth, during the company’s annual review in Geneva.
On 17 March 2023, Mint reported that Gopinathan’s management style, the company’s strategic decisions, and relative underperformance had become enduring sources of stress between several executives and the former CEO.
The reorganization
Less than a year after Krithivasan’s appointment, TCS’ chief operating officer (COO), Natarajan Ganapathy Subramaniam, retired, having turned 65, the retirement age. Subramaniam took over as the COO in February 2017 when his younger brother Chandra moved to steer Tata Sons.
But last year, TCS decided not to fill in the vacancy. “On the COO part, he’s (Subramaniam) been doing many things, and no one individual can replace him. Our current thinking is that we are redistributing the work he has been doing among our leadership team,” Krithivasan said during a post-earnings meeting with the media, on 12 April 2024. “And we don’t intend to appoint a new COO for now,” the CEO added.
A year later, Tata Sons entrusted two executives with leadership positions at TCS. Aarthi Subramanian was appointed COO, while Mangesh Sathe was appointed the company’s chief strategy officer. Both the appointments are effective from 1 May.
Krithivasan, in a press conference on 10 April, said he is thankful to the parent entity for “letting her (Aarthi)“ be with TCS.
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“The appointment of key management personnel from Tata Group entities is interesting and perhaps indicates the group is taking a keener interest in TCS,” an 11 April note from Kotak Institutional Equities, written by analysts Kawaljeet Saluja, Sathishkumar S., and Vamshi Krishna, stated.
Aarthi Subramanian, a former TCS executive, was made the Tata Group’s chief digital officer in August 2017, less than six months after Chandra took over as the boss.
The organizational structure at TCS includes eight ‘vertical’ businesses, such as banking and financial services, manufacturing, communications and media. Additionally, six business divisions—Cloud, Cybersecurity, Internet of Things, TCS Interactive, Enterprise Solutions, and AI—act as ‘horizontals’ to serve customer needs.
The heads of all the six business divisions will now report to Aarthi Subramanian, according to another executive who didn’t want to be identified.
According to this executive, Sathe, formerly the CEO of Tata Strategic Management Group, Tata’s management consulting business, is expected to help build a stronger consulting practice within TCS.
The worry
With all these changes, let’s analyse how TCS fared over the last two years under Krithivasan’s supervision.
TCS, in short, has done well compared to its peers.
Krithivasan, like we mentioned before, took over as CEO on 1 June 2023. Between 1 July 2023 and 31 March 2025, TCS managed a 0.47% compounded quarterly dollar revenue growth; its revenue inched up from $7.22 billion in the June quarter of 2023 to $7.46 billion in March 2025. Infosys, in comparison, clocked compounded growth of 0.35% during this time, and Accenture Plc only 0.1%.
TCS also retained its industry-leading profitability, improving its operating margin from 23.2% during the June quarter of 2023 to 24.2% in March quarter 2025.
So, why is Chandra worried?
TCS’ growth, over the last two years, has been powered by one client—Bharat Sanchar Nigam Ltd (BSNL), the Indian government-owned telecom giant.
In June 2023, TCS announced a large deal win from BSNL, worth a billion dollars.
“Overall, the deal size is larger because there are multiple things,” former COO N.G. Subramaniam told analysts during a post-earnings interaction on 11 October 2023. “But currently, we have contracted for the supply, installation, commissioning, design and optimization of the network. Overall, it’s safe to assume that a good part of this $1 billion is something we would like to bill and collect from BSNL within 12 to 18 months.”
Subsequently, TCS won more work as part of the contract, bringing the total value of the job to $1.5 billion.
Analysts at Kotak, the brokerage, estimate that TCS received $222 million in the year ended 2024, followed by $1.14 billion last year. The company will receive the remaining $130 million of the $1.5 billion deal in the April-June period of the current financial year, they further estimated.
Stripping out $290 million in revenue from the BSNL deal in the January-March period, as estimated by Kotak, TCS generated $7.17 billion in revenue. This implies a 0.1% compounded decline over the seven quarters Krithivasan has been at the helm.
With the BSNL job winding up, many are worried about the company’s growth in 2025-26.
“The magnitude of BSNL ramp-down (if it goes un-replaced) would mean that FY26 could be a year of declining revenue,” Motilal Oswal analysts Abhishek Pathak, Keval Bhagat and Tushar Dhonde wrote in a note dated 11 April.
The magnitude of BSNL ramp-down would mean that FY26 could be a year of declining revenue.
—Motilal Oswal analysts
TCS, therefore, risks reporting a full-year revenue decline, the company’s first since going public in August 2004. Even during the pandemic year of 2020-21, TCS added $143 million in incremental revenue, or a growth of 0.7%.
TCS does not provide guidance, but Krithivasan said last month that the company expects to grow faster than the 4.2% constant currency growth it clocked in 2024-25. Constant currency does not take into account exchange rate fluctuations.
The pessimism
Not many subscribe to the management’s optimism.
Karan Uppal and Harshraj Rao, analysts at Phillip Capital, wrote in a note dated 11 April that the management’s target of international business growth in FY26 to be better than FY25 “doesn’t excite much confidence”.
The company’s base case is that the current uncertainty will dissipate. However, analysts at Motilal Oswal stated that they would remain cautious; too little time has passed to ascertain whether the current macro economic events are short-lived.
TCS’s 24.2% operating margin in the March quarter of 2024-25 was the lowest fourth quarter margin in 16 years, according to the analysts at Phillip Capital. “The margin contraction was driven by lower growth, promotions (-100bps), and marketing & travel costs (-60bps), partially offset by operational efficiencies and currency tailwinds,” they noted.
Usually, for TCS, the first quarter of the fiscal year (April-June) has lower profitability because of wage hikes. The profitability improves during the year, with margins peaking at the end of the fourth quarter.
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The loss
So, why is TCS facing growth blues?
“The challenges faced by TCS are two-fold: We’ve seen a lot of senior executives, especially at the key account levels, move out. During the same time, the quality of graduates being hired by the company is not what it used to be in the past,” said another executive, who has been with the company for 19 years. He didn’t want to be identified either.
“We lost the Phoenix contract because of complacency. We lost the Zurich Life Insurance deal because we were obsessed with margins, while the competitor agreed to drop the price,” said the first executive cited above.
The competitor referred to here is Wipro. Last month, it bagged a 10-year contract from UK-based insurance company Phoenix Group, valued at $650 million.
According to the executive, TCS recently lost a potential deal from Zurich Insurance Group, valued at over $500 million—the contract was reportedly bagged by DXC Technology.
We lost the Phoenix contract because of complacency. We lost the Zurich Life deal because we were obsessed with margins.
— An executive.
Unsurprisingly, at least one brokerage stated that TCS has lost its leadership position.
“TCS’ relative resilience (ability to bounce back from a shock) versus peers has narrowed compared with the past. Relative competitive advantage has declined,” Kotak wrote in a note dated 11 April. “TCS did not lead growth in the past two years, even when demand was driven by cost take-outs. Performance in developed markets in FY2025 has been poor with a decline in North America,” the note added.
“TCS managed the 2008-09 recession quite well and gained better market share after the recession compared with peers such as Infosys. We believe relative resiliency versus peers is lower in the current environment. TCS has not been able to outperform Tier 1 peers on revenue growth in the past couple of years, despite the demand environment being more conducive to cost take-outs, TCS’ area of strength. Performance in developed markets in FY2025 has been disappointing. Revenue declined 0.2% in developed markets, significantly lower than our estimates for Infosys and HCLT, indicating market share losses for TCS,” Kotak further noted.
It is important to compare TCS’ current run with that of Chandra’s seven-year tenure.
Chandra took over as the CEO of TCS in October 2009. Under his watch, the company’s revenue grew from $6.34 billion in March 2010 to $17.6 billion by the end of March 2017. TCS clocked 15.7% compounded growth and added $11.24 billion in incremental revenue in seven years, making Chandra arguably the most successful CEO in the history of India’s $283 billion IT services industry.
TCS’ performance was second only to Cognizant Technology Solutions Corp., which grew the fastest under its founder and former CEO Francisco D’Souza (See chart).
Ever since Chandra moved out of TCS, the company’s growth slowed, falling behind Infosys and Accenture Plc.
TCS ended 2024-25 with revenue of $30.18 billion—a compounded growth of only 6.99% over the last eight years, albeit from a higher base.
The big question
A bigger reason behind TCS’s underperformance could be the confusion about its approach towards generative AI (GenAI).
Sample this. Until March 2024, TCS offered AI solutions through its eight business verticals. In April, TCS merged its AI and cloud businesses into one entity named ‘AI.Cloud’. In February this year, TCS split this year-old business division, letting Cloud and AI run as separate business divisions.
“We are still struggling to have the right org structure for AI while Accenture has won over $5 billion in GenAI deals in the last two years,” said an executive who didn’t want to be named.
Accenture claims to have won $5.6 billion in overall GenAI bookings since it first quantified GenAI orders and revenue in June 2023, according to a Mint review. International Business Machines Corp. (IBM) has reported $5 billion in bookings and revenue from the new technology over the last two years.
For now, none of the homegrown IT services firms, including TCS, share any number of order wins or revenue from AI-related work.
A bigger reason behind TCS’ underperformance could be the confusion about its approach towards generative AI. The company is still struggling to have the right org structure.
“Finally, despite being well-positioned to tackle the GenAI wave, TCS might not benefit the most due to the disadvantage of being a large incumbent,” according to analysts at Kotak. “It will be difficult for TCS to aggressively incorporate GenAI into its services portfolio, given the larger size relative to challengers who can better afford to cannibalize existing revenue to get a bigger portion of the pie from incumbents,” the brokerage stated.
Under Krithivasan’s watch, TCS has not stopped launching new service offerings. On 24 April, TCS launched a sovereign cloud (a cloud computing framework under which all data centres are built within the territorial boundaries of a country) at a half-day event in New Delhi. Close to 100 company executives, including the CEO, were in attendance.
One of the stars of the evening was Girish Ramachandran, president of Growth Markets, a division that includes business from the Asia Pacific, the Middle East, Africa, and Latin America. He oversees nearly a fifth of the company’s $30 billion revenue. Ramachandran was the day’s keynote speaker, followed by Krithivasan.
Later in the evening, many senior executives took selfies with Ramachandran, buttressing his star status. After all, he has scaled his business from $1.06 billion in April-June 2023 to $1.41 billion during the January-March period, a 4.16% compounded growth rate, far higher than the company’s overall performance.
For TCS to rock again, Chandra would hope for similar execution from other executives.
However, this won’t be easy. Apart from global uncertainty, the rise of generative AI has ushered in new challenges and now poses an existential threat to the IT services industry.
What happens if things don’t improve at the company? Would Chandra bring in a third CEO before his second stint as the Tata Sons chair ends in February 2027?
For now, analysts and employees can only speculate.
