In a strategic shift that could secure steady, recurring income rather than one-off project fees, Tata Consultancy Services (TCS) said it expects the contracts linked to its data-centre expansion to be long-term agreements with hyperscalers and AI companies. These will focus on “long-term committed and annuity revenues”, even as negotiations remain underway.
During an investor interaction titled ‘TCS’ AI Data Centre Investment and Opportunity’ on Friday, chief financial officer Samir Seksaria and chief strategy officer Mangesh Sathe said the initiative reflects the company’s plan to build a foundational layer for its broader AI ambitions.
The IT services major said this phase is “not a stand-alone investment but a very core part of our overall aspiration”. “If we don’t invest in this, we will not be able to meet our aspirations,” the team further stated.
TCS added that its board was “receptive” to the proposed investment, citing its strong cash flows and conservative capital allocation so far as key enablers.
$7 Billion Push for AI Infrastructure
The company recently announced plans to build around 1 gigawatt (GW) of AI data centre capacity in India over the next five to seven years, representing an investment of roughly $6.5-7 billion.
The executives stated that the move aligns with the company’s vision to create a long-term, scalable infrastructure base for its AI strategy, not just to serve internal needs but to support enterprise customers and global technology partners.
TCS said multiple players can participate in India’s emerging data-centre market, as growth is expected to increase “multi-fold”. It believes there is “sufficient room for more players” to enter the segment. The company aims to leverage its strong relationships with enterprise clients and its capability to execute large-scale infrastructure projects as it enters the space.
Deep Partnerships with Hyperscalers and Enterprises
The company outlined its go-to-market approach as one that involves close partnerships with both hyperscalers and enterprise customers across public and private sectors.
“We are already in all those boardrooms and CXO rooms where these conversations are happening today. Our ability to shape those will become better because we will be able to provide that entire end-to-end piece,” the team said.
TCS also dismissed concerns that its services business and new infrastructure venture might operate in silos. It said coordination with partners “at the leadership level” ensures complete alignment between both arms of the company.
The firm said it has already launched its sovereign-cloud business in India and other markets and that the upcoming data-centre infrastructure will be used to strengthen that offering.
The Rise of AI Workloads
Responding to questions about the size of the AI-training and inferencing data centre market in India, TCS said that while the segment remains small today, it is expected to grow rapidly as GPUs replace CPUs and demand for sovereign AI expands.
Globally, “around 10-15% of the DC capacity overall goes with AI, and that part is only going to keep increasing”, the company said.
Executives believe that while India’s current market is at an early stage, the shift to AI-specific data centres will accelerate as enterprises adopt generative AI models and government initiatives promote sovereign infrastructure.
Tata Communications in the Vendor Mix
TCS confirmed that Tata Communications will be among the vendors considered for networking solutions in the data-centre business. They said the networking layer would form part of the vendor mix, with Tata Communications providing complementary capabilities in connectivity and network management.
On unit economics, the company said it was still “too early” to disclose detailed figures, but described the data-centre model as a “relatively high EBITDA-margin business.” Revenue will primarily come from rental yields and power-supply margins, while networking services will operate on a pass-through basis.
The company pointed out that significant assets under the plan are expected to have useful lives of “upwards of 15 years”, while power infrastructure is expected to last “at least 25 years”.
TCS Data Centres Go Green
The executives stressed that the company expects competitive margins driven by a high mix of green energy.
“It would be high on green energy, and the mix that we will offer will have enough margin for us to make and yet be competitive,” the team said.
They added that the levelised cost of electricity for the new data centres would be lower than grid prices, giving TCS an advantage in both sustainability and cost efficiency.
On the possibility of power shortages or grid constraints slowing down the rollout, the company said India’s grid is “much more reliable” than those in several Western markets.
It highlighted dual-substation connections, captive power, and large-scale battery energy storage systems as factors that would ensure an uninterrupted and cost-effective power supply.
Regarding whether TCS will eventually offer GPUs-as-a-service, the company said it is open to entering that “active layer” of the data-centre value chain in future, but only once the “passive data-centre” infrastructure build-out is executed flawlessly and based on bespoke commercial negotiations with anchor customers.
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