TCS Bets Big on AI Infrastructure with New 1 GW Data Centre Project and $10 Billion Deal Wins

Tata Consultancy Services has announced ambitious plans to build up to 1 GW of data centre capacity in India over the next five to seven years, as part of its push to become the world’s largest AI-led technology services company. The move was detailed in its Q2 FY26 earnings release and investor call on October 9.

The company declined to disclose the full investment schedule, but Chief Executive K. Krithivasan said that each block of 150 megawatts would require about $1 billion. If that ratio holds, the full 1 GW rollout implies a total outlay of about $6.5 billion, to be funded through a mix of equity, debt, and financial partners (moneycontrol).

New Subsidiary, Sovereign Focus, and Phased Build

TCS will conduct this infrastructure initiative through a new wholly owned subsidiary focused on AI infrastructure and sovereign data centres. While this new subsidiary will have separate management, it will maintain close alignment and strategic partnerships with TCS’s existing business units.

The first revenues from the data centre arm are expected to trickle in 18 to 24 months from now. All data and compute operations under this initiative will be hosted within India’s shores. This “sovereign data centres” approach aims to serve hyperscalers, deep-tech firms, government bodies, and large Indian enterprises. The data centres will primarily offer passive infrastructure, leaving compute and storage to clients.

TCS has said that India currently has about 1.2 GW of data centre capacity, and demand is forecast to expand nearly tenfold over the next five to six years. In that light, the 1 GW plan could address a sizable share of unmet demand in the market.

Earnings, Market Reaction, and Strategic Impacts

In its Q2 FY26 earnings, TCS reported a 1.39% rise in consolidated net profit to ₹12,075 crore, while revenues from operations climbed 2.39% to ₹65,799 crore versus last year. On a sequential basis, revenue rose 3.7% but net profit declined by 5.3%. The company also declared a second interim dividend of ₹11 per share, to be paid on November 4, 2025 (Economic Times).

Margins widened to 25.2% for the quarter, excluding severance costs. However, India revenues crashed 33.3% year-on-year, mainly due to the absence of contributions from BSNL. India now contributes just 5.8% to total revenue, down from 8.9% a year ago (The Times of India).

On the stock market front, TCS shares dipped 1.5% to ₹3,015 on October 10 after the results were released, though much of the investor attention centred on its foray into AI infrastructure. Analysts believe that the data centre announcement reinforces TCS’s commitment to AI, positioning it ahead in the race for infrastructure dominance.

Still, some brokers remain cautious. Jefferies trimmed its earnings estimates by up to 1% and expects 4% EPS growth for FY26, noting that the data centre venture may offer limited near-term synergies. However, others see the move as bold and necessary to maintain tech leadership amid rising competition (Economic Times).

Acquisition, Retrenchment and Portfolio Moves

Alongside the data centre announcement, TCS also revealed its acquisition of ListEngage, a U.S.-based Salesforce and AI advisory company. The deal cost $72.8 million (around ₹646 crore) and brings over 100 professionals to bolster TCS’s enterprise solutions footprint in the U.S. market (TCS).

In a related development, TCS recorded a drop of 20,000 employees in its headcount by the end of the quarter. It also disclosed it paid ₹1,135 crore in severance to mid- and senior-level employees as part of a broader restructuring. Concurrently, about 80% of its workforce received wage hikes during the quarter (India Today).

In terms of business momentum, TCS secured new deals worth over $10 billion in the quarter. Krithivasan noted sequential growth in most geographies and sectors, except the U.K. and the consumer segment.

What This Means for India’s AI and Data Infrastructure?

TCS venturing into sovereign AI data centres is part of larger trend in India’s tech infra. It taps into growing demand for data localisation, security and AI processing to bring computing and hosting within national borders. Well played, it could also form a pretty effective way of fortifying India’s generative AI, large model training, and high-throughput compute workloads.

With a healthy balance sheet and cash flow, TCS seems to be well-equipped to cope with the burden on the financials of this asset-heavy project at a cost without eroding its return ratios for shareholders. In the long run, this infrastructure layer could also be a good complement to TCS’s service lines and could offer steady, annuity-like sales.

Whether TCS can actually execute remains to be seen; it will not only determine its fate but also India’s position in the global AI infrastructure race.

Sources

moneycontrol
Economic Times
The Times of India
Economic Times
TCS
India Today