(Bloomberg) -- Tata Consultancy Services Ltd. reported profit that topped analysts’ forecasts after customers hired it for machine learning, cloud and other artificial intelligence-driven projects to help them keep costs in check.

Net income rose 9% to 124.3 billion rupees ($1.5 billion) in the fourth quarter through March. Analysts, on average, had projected a profit of 120.3 billion rupees. Sales climbed 3.5% to 612.4 billion rupees. Shares in TCS closed 0.4% higher in Mumbai before the earnings were announced.

India’s nearly $250 billion tech industry, led by TCS, is trying to bounce back from a slowdown caused by overseas enterprise clients cutting back on technology spending to cope with challenging economies. Conflicts including Russia’s persistent war on Ukraine has also created uncertainty for businesses.

That softness, though, could soon come to an end. As global economies show signs of normalizing, companies may be willing to spend more on technologies such as generative artificial intelligence, driving growth for Indian software services exporters.

“It’ll be very difficult to say when the growth would return but this is probably the best guidance we’ve given” next financial year will be better than the last, TCS Chief Executive Officer K Krithivasan said at a news conference in Mumbai Friday. 

Client budgets in the key market of North America are not contracting, Chief Operating Officer N Ganapathy Subramaniam said. Enterprises want to invest in areas such as cybersecurity, supply chain resilience, AI-related aspects, payments and risk management, he said.

For years, India’s software companies offered cheap back-office solutions to the world’s biggest corporations, giving rise to the term “Bangalored.” But over the past several years they’ve moved up the value chain to become critical partners to companies in business transformation. TCS and its smaller Indian rivals are now banking on the rise of big data, AI, cloud and machine learning to earn higher margins and accelerate growth.

What Bloomberg Intelligence Says

Tata Consultancy Services’ 4Q results showed continued pressure on sales growth, reinforcing our thesis that near-term consulting gains from IT services providers will likely stay muted. Total contracted value rose 32% despite only 2% sales growth, suggesting demand is being driven by larger and longer projects, likely on a high blend of cost-cutting, though gen-AI and cloud may increasingly factor in.

— Anurag Rana & Andrew Girard, analysts

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TCS, Asia’s biggest outsourcer, is betting on its partnership with OpenAI-backer Microsoft Corp. to develop AI-based software services for clients, targeting higher margins and faster growth, Krithivasan told Bloomberg News previously.

(Updates to add comments from company executives)

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