FY26 wrapped: -2.4% CC revenue but 4-year-high 25% margin, $40.7B TCV.

At the media conference you mentioned tactical investments which weighed on margins this quarter. Can you elaborate?

I meant tactical interventions, which had a sequential margin impact of 100 basis points. And those are primarily promotions, which were effective 1st of January.

What drove these promotions when growth was slow and wage hikes for next year are uncertain?

It is not that promotions were not planned earlier. It is in its normal course. We were probably one of the only companies who gave a full cycle of increment also, starting at the beginning of the year. And these are not something which were unplanned.

Once dust settles on tariff tantrums, do you think there are any new areas which could open up for the IT industry over the next one to two years?

Medium to long term, AI/GenAI is gaining a lot of traction and momentum. While the immediate focus has been on AI for IT, AI for Business is picking up traction. The second is, as we've been calling out, technology debt continues to be very high. So tech transformation in many forms - moving into cloud, moving out of legacy infrastructure - will gain steam, once people have more visibility and certainty on the medium to long-term.

You're still talking about FY26 being better than FY25 despite 8% decline in full year bookings and macro deterioration. What gives you confidence?

We have had two quarters of good TCV. And that's the most important factor giving us confidence. And our belief - we can be wrong or believe that this uncertainty will be short-lived. Some clarity will emerge, and our clients will start investing towards more technology transformation programs. This is essentially based on client conversations we are having. And we believe some of the pauses we saw are more temporary.

Last quarter you talked about deal durations being lower meaning TCV converts faster. Should we think about FY25 deal wins in that context - although 8% lower YoY, ACV is higher because durations are lower?

Ravi, if I remember right, we talked about the deal cycles being shorter. They're shortening in Q3. We did not say the deal durations are shrinking. And the deal cycles continue to remain where it was at Q3 level. We did not say in Q3, the deal duration has shrunk.

The promotion cycle and wage hike deferrals seem to be conflicting signals. Were these promotions delayed from last April?

These promotions were planned and that's why they were carried out. The wage hikes are for FY '26. And that is why we are basically looking at the way there is uncertainty in the environment. Once clarity emerges, we will decide when do we carry out these wage hikes.

Can you clarify your comment about FY26 better than FY25 - is that for the whole business or only international?

It is for the international business. Definitely, we believe FY'26 will be stronger than FY'25. But there is also an expectation that once the uncertainty settles, there is an opportunity for us to deliver as a whole business also because we are constantly looking to replace the headwind. We are also constantly looking at opportunities to replace this revenue domestically and internationally also.

On the wage increase cycle - in the last cycle, when were such promotions given?

We have been giving promotions every year as per the cycle every quarter. We have done two cycles of promotions, as per the plan, and that has happened this year. This is done as per the plan for FY '25. There are absolutely no delays in this.

On AI for IT, is there any deflation you see in your existing order book? And on AI for Business, is this a net new opportunity funded by savings on legacy?

On AI for IT, I won't call it deflation. We try to deploy AI in every project we do. If there is a productivity gain because of AI, we will share those gains with our customers. So what we did with $100 we may now do with $90 or $95. And on AI for business, most of it would be net new because these are programs not done before at all. When there is cost optimization, some funding can come from savings on existing programs which can come from AI for IT, going towards funding new AI for business programs.

On the variability of about 2 percentage points from beginning of quarter expectation - was that largely a function of how March played out?

A good portion of that came from delays that happened in March. From the middle of February, some sectors started seeing chatter, particularly when consumer confidence fell towards the end of February. Some sectors had delays and deferrals starting in late February or third week of February, but a significant part of it is in March.

How do you see net impact of AI for business vs AI for IT playing out currently and over the next few years?

In one of our large deals we won, we demonstrated to our customer how AI for IT can save them significant cost. That resulted in the customer giving us a much larger portfolio and resulted in market share gain. For TCS, it proved to be net incremental in revenue, not deflationary. We are not seeing instances where AI for IT is creating deflationary situation, and after including AI for business, we see net-net positive at this time. But just keep in mind that all these projects, we are not talking about huge material number at this time.

On margins for FY26 - if international markets are better and software license/equipment cost impact is lower, what are the headwinds?

If the current uncertainty prevails, that can lead to lower operating leverage as utilization will be impacted and sudden contraction in demand delays or deferrals can have an impact on margins, so that is one headwind. Secondly, we might not enjoy the margin benefit coming from currency movement as we have seen in FY '25.

Is the uncertainty/delayed decision-making across all segments or more in tariff-impacted verticals like manufacturing and retail?

There is some impact across the board, but there are some sectors more impacted than others. In our consumer business, retail, CPG, airlines, travel hospitality see more impact. There is impact in the auto sub segment within manufacturing. But if you take BFSI, by and large the segment is doing okay. There is some softness in insurance.

Any color on hi-tech? Hyperscalers have been talking about softness.

Our hi-tech segment per se is not significantly impacted. But we classify professional services under the overall tech services umbrella. Professional services have some softness.

If developed markets grow higher than FY25, should we expect FY26 margins to be better than FY25?

Our aspiration for revenue growth with profitability and operating margins getting closer to 26% still remains. To your direct question, yes, we should be able to improve margins. Broad-based revenue growth should bring in efficiencies and better operating leverage. The levers we have been banking on still continue to provide some potential like the ones of pyramid, productivity and realization.

Any changes envisaged for hiring given the strong anti-immigration stand and H1B exposure?

It has been the same. Whatever H1B visas we got last year, our actual ratios are even better this year. Our model is global. We will continue to hire people globally and historically proven that these H1B visa do not affect our business model.

On talent strategy for AI for Business - any change in mix of hiring from campus or laterals?

If you look at our trainee intake, the percentage of hires we have in digital is 40% compared to 17% last year. So that definitely changes the mix - and 50% of our lateral hires are coming in with high-end skills, including AI/GenAI and others as well.

Getting into 1Q, how would you see your visibility for the quarter compared to last year?

When we got into Q1 of last year, probably we had more visibility than what we have today. But at the same time, we are entering the quarter with two good quarters of TCV also. I believe this current uncertainty will be more short lived and more clarity will emerge. Once that emerges, we'll be very confident of the quarter. So compared to last Q1, maybe there is more uncertainty. But at the same time, we are entering with a strong TCV and pipeline for the future.

On 60bps margin impact from marketing exercises - is that one-time or recurring? And on promotion spending vs last year?

On the 60 basis points - these were mainly marketing interventions, higher travel, some purpose-driven initiatives or CSR expense. Nothing unusual, you'll have pluses and minuses each quarter. So it's not very significant to call out as an exceptional or onetime item.

Going forward, do you have reasonable confidence that this momentum should continue into next year? Has pipeline been steady or positive Q-o-Q?

TCV is very difficult to predict because it changes based on even the customer delays a decision by a week or two, it can cross over a quarter. What we can talk about is our pipeline. Our pipeline continues to be strong at a very high level and so it gives us the confidence. As decisions are being made, we will have a strong win rate, and we'll be able to report a good TCV. It has been steady and slowly increasing.