PrimePress Q1 Results: Tata Consultancy Services (TCS) kicked off the April-June quarter results for fiscal 2024-25 (FY25) on Thursday, July 11, reporting a rise of 8.7 per cent in its consolidated net profit at ₹12,040 crore, compared to ₹11,074 crore in the corresponding period last year. India’s largest information technology (IT) services provider has beaten most D-Street estimates regarding net profit and segment revenue growth during the quarter under review.
The Tata Group IT giant, the first among the Indian IT majors to declare the first quarter earnings of the current fiscal, reported revenue growth of 5.4 per cent to ₹62,613 crore, compared to ₹59,381 crore in the year-ago period. On a quarter-on-quarter (QoQ) basis, TCS revenue grew 2.2 per cent in the June quarter, which was driven by its growth in the India business segment.
TCS reiterated that it feels FY25 will be better than the previous fiscal year for the business. K Krithivasan, TCS’s Chief Executive Officer (CEO) and Managing Director (MD) said that the IT major will create new capabilities in emerging technologies and invest in innovation, including a new artificial intelligence (AI)-focused TCS PacePort in France and an IoT lab in the US.
TCS revenue from North America declined by 1.1 per cent, leading to the share of the largest market slipping to 49.5 per cent in the pie. Revenue from India grew 61.8 per cent, driven by the 4G network rollout work that TCS is doing with the state-run telecom operator, Bharat Sanchar Nigam Ltd (BSNL).
Responding to a question on three-fourths of the incremental revenue growth coming from BSNL in the June quarter, TCS CEO Krithivasan said that while BSNL did grow well, non-BSNL revenues had a substantial part in this growth when compared to the preceding March quarter of FY25.
TCS reported new deal wins of $8.3 billion in the June quarter, out of which $4.6 billion were from North America and $2.7 billion came from the BFSI vertical. The new wins or total contract value (TCV) were much lower than in the quarter-ago and year-ago periods, but the CEO said the company is comfortable with a quarterly figure in the range of $7-9 billion.
On the headcount front, TCS added employees at a net level for the first time in multiple quarters, with the overall strength going up by 5,452 to nearly 6.07 lakh professionals. The IT services giant also announced an interim dividend of ₹10 per equity share and kept August 5 as the record date for the same.
Regarding TCS results, Manish Chowdhury, Head of Research at the domestic brokerage Stoxbox, said the TCS numbers are a “mild surprise” on the upside. They added that they will monitor BSNL deal ramp-up, demand trends for the industry in the medium term, and deal wins going forward.
Sanjeev Hota, Head of Research at Sharekhan by BNP Paribas, called it a “solid” quarter with strong revenue growth. “Expecting an overall demand recovery in the second half of FY25 (for the Indian IT sector) as most of the headwinds are bottoming out, while FY26 will be a full-blown recovery,” Hota said.
With the wage hike behind, TCS management believes the EBIT margin trend will move towards the aspirational 26-28 per cent band. The management commentary indicated the order pipeline continues to stay healthy and the current moderation was in line with normalized order TCV of $7-9 billion, according to Hota.
Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, also responded to TCS results and said, “All major markets and verticals have returned with sequential growth. Overall, the frontline numbers look like the worst is behind us, and we may see a revival in the IT sector from Q1 earnings.”
According to analysts, the key monitorables for TCS going forward are updates on the BSNL deal ramp-up, medium-term industry demand trends and the impact of macro headwinds on demand, deal wins and deal pipeline, revenue growth, and margin outlook for FY25, and investments in GenAI partnerships.
Technically, TCS stock is trading significantly above its anchor VWAP support mark of ₹3,900.00 on its daily timeframe charts. With the stock making higher highs and remaining well above its immediate support level, it appears poised to reach the ₹4,030.00 and ₹4,050.00 levels, according to Tapse.
Analysts’ comments suggest that the TCS share price will likely open higher on Friday, July 12. Ahead of the announcement of Q1 results on July 11, shares of TCS settled 0.33 per cent higher at ₹3,922.70 apiece on the BSE. In the last month, shares of TCS have given investors 1.68 per cent returns and 19.92 per cent in the last year.
