(Financial Express)
Tata Consultancy Services (TCS) missed Street expectations on both the revenue and profit fronts in the January-March quarter. The country’s largest IT services firm faced some project deferrals in March and the near-completion of the BSNL deal added fewer numbers to the topline. This was the second consecutive quarter that the company missed estimates.
Consolidated revenue rose 0.8% sequentially to `64,479 crore, missing Bloomberg’s estimate of `64,837 crore. Net profit declined by 1.3% quarter-on-quarter at `12,224 crore, falling short of the estimate of `12,765 crore.
“There was some amount of project deferral that happened in March that was uncertain. We were hoping revenue growth would be higher than 1% when we were in the early part of the quarter. But what we were primarily looking at is that all business verticals are growing and all major markets are growing,” chief executive officer K Krithivasan said during the post-earnings press conference.
He also said the company is observing delays in decision-making and commencement of projects with respect to discretionary investments due to the tariffs imposed by the Donald Trump-led government in the US.
Even with an increase in the revenue, the company’s operating margins fell 30 basis points sequentially to 26.3% in the fourth quarter.
“From a Q4-to-Q4 margin perspective, I think TCS was the only company which probably gave a full cycle of increments. That as well as combined with investments in capability building, in infrastructure expansion further is the overall impact which we are seeing,” chief financial officer Samir Seksaria said.
The company’s total contract value (TCV) of new deals came in strong at $12.2 billion, a significant jump from $10.2 billion in Q3FY25. TCS announced a final dividend of `30 per share.
“We expect CY25 to be better than CY24 based on the order book that we have announced and kind of deals we have signed. While there could be some short-term uncertainties, but FY26 would be a better year than FY25,” Krithivasan said.
The IT major’s revenue contribution from its largest vertical–the financial services–saw a 2.5% increase on a year-on-year basis, while the second-largest contributor–consumer business–fell 0.2 bps.
“BFSI in general and particularly in North America has been good in Q4 as well. And globally also, what we declared, it’s a good growth compared to most other business verticals. And the deal momentum is also continuing to be robust for us in BFSI North America. The only segment where we find some softness could be insurance, but the rest of it has been quite robust,” Krithivasan said.
Revenue from life sciences and healthcare declined by 5.6% on year, while manufacturing and communication & media fell 2.9% and 9.8%, respectively.
Meanwhile, revenue from technology and services and energy, resources and utilities rose 1.1% and 4.6%, respectively. Sales from those of regional markets and others rose 22.5%.
On the geographies front, the company’s revenue contribution from North America fell and sales from Europe, Asia Pacific and India rose. The revenue from North America fell 1.9% y-o-y to 48.2% and that of the UK and Continental Europe rose 1.2% and 1.4% to 16.8% and 14.3%, respectively, in the quarter ended March. The company’s revenue from India rose 33% to 8.4%.
Further, the company also said it has a was seeing strong traction in the GenAI space and the technology is also one of the main growth diver for the company.
“There are no deal cancellations coming in AI. It is actually one of the key factors driving our growth and driving the order book,” he said.
However, the company expects uncertainty in clients discretionary spending due to the tariffs imposed by the US government and is also seeing slower decision making especially in consumer retail and automobile segments.
“Impacted businesses tend to be in the consumer retail sector. Retail has been impacted to some extent. And when I say retail it also includes travel, and hospitality. And another sector that’s been impacted is auto. Manufacturing still seems to be ok,” Krithivasan said.
