Tata Consultancy Services (TCS) hosted an investor call on October 31, 2025, discussing its AI data center investment and opportunities. TCS aims to become the world’s largest AI-led technology services company, viewing AI and sovereign data centers as key components. The investment is driven by demand-supply mismatch, promising long-term annuity revenues. A $1 billion investment is planned for capacity building, funded via a mix of debt and equity. The initial phase focuses on hyperscalers and AI companies.
Strategic Rationale
TCS is investing in AI data centers as part of its strategy to become the world’s largest AI-led technology services company. According to Samir Seksaria, CFO, this move isn’t isolated but is a key pillar in TCS’s overall strategy. The primary driver is a significant demand-supply imbalance, creating a niche adjacency for TCS, expected to yield long-term, committed annuity revenues.
Market Opportunity
Mangesh Sathe, Chief Strategy Officer, highlighted the global data center market’s expected capital investments over the next decade. He noted the company’s expertise would enable service provision in various markets, leveraging expertise in working with hyperscalers, AI companies, the public sector and the private sector. TCS has front-row seat visibility on requirements.
Data Center Specifications
Deepesh Kiran Nanda detailed that TCS is focusing on the AI side of data centers, emphasizing high rack density, potentially averaging 240 kW per rack. This involves substantial liquid cooling, aiming for upwards of 70%, targeting a Power Usage Effectiveness (PUE) between 1.25 and 1.3. The demand is largely from international AI companies, aligning with the goal to cater to AI load servicing in the initial rollout phase.
Financial Aspects and Capacity
TCS’s data center plans include an investment of approximately $1 billion. This won’t be solely funded through TCS’s cash reserves but will involve a combination of debt and equity, with potential partners involved. The build-out will be phased, starting with 100 to 200 MW per phase, scaling over an estimated 5 to 7 years to reach peak capacity.
Projected Returns
TCS anticipates the investment to generate returns comfortably above the cost of capital, projecting an Internal Rate of Return (IRR) in the mid-to-high teens at the project level. The first revenue streams are expected around the FY2027-28 timeframe.
Land and Execution
TCS is considering land parcels in key data center hubs like Navi Mumbai, Hyderabad, Bangalore, New Delhi, and Pune. Construction will involve contracted key items, with a goal of competitive bidding, leveraging in-house strengths. The targeted completion for the full construction cycle, from the start date with land available, is 18 months.
Source: BSE
