Tata Consultancy Services (TCS) kicked off the earnings season on Thursday with a mixed set of numbers for the quarter ended December 31 2024, but indicated the early signs of revival in discretionary spending thereby signalling a better 2025.
India’s largest IT services firm reported consolidated net profits that were in line with estimates, but its revenues missed the forecast of brokerages.
An encouraging highlight was the total contract value (TCV) or deal wins which at $10.2 billion marked an increase of nearly 19 per cent over $8.6 billion in the second quarter.
TCS reported a net profit of ₹12,380 crore against ₹11,058 crore in the corresponding period of the previous year, an increase of 11.95 per cent. Analysts had forecast its net profit to come in the range of ₹12,400-12,700 crore.
Revenue in rupee terms stood at ₹63,973 crore compared with ₹60,583 crore in the year-ago period, a rise of 5.60 per cent.
Analysts had pencilled in a topline of around ₹64,500 crore. In dollar terms, the revenues stood at $7,539 million against $7,281 million last year and lower than $7,670 million in the preceding three months.
The October-December quarter is a seasonally weak quarter for the IT sector due to holidays and furloughs which resulted in the lower number of billing days.
The industry which garners a large part of its revenues from the North American and European markets have been hit by high inflation and elevated interest rates which hit client spending.
“We are pleased with the excellent TCV performance in Q3 which was well-rounded across industries, geographies and service lines lending good visibility to long-term growth,” K. Krithivasan, chief executive officer and MD, TCS said.
“BFSI (banking, financial services & insurance) and CBG (consumer business group) returning to growth, continued stellar run of regional markets and early signs of revival in discretionary spend in some verticals give us confidence for the future.’’
Speaking to the press after the declaration of results, Krithivasan said that the macro factors witnessed in the second quarter of the fiscal continued during the October-December 2024 period. He indicated that due to seasonal weakness and muted discretionary spend, most of the verticals reported a negative growth over last year.
However, the TCS CEO pointed out that 2025 will be better than the previous calendar year. ``Looking at the order book and conversation with customers gives us comfort that discretionary spending is likely to increase. We are seeing early signs of increase,’’ he noted.
``TCS reported revenue growth declined 1.7 per cent quarter-on-quarter missing our modest estimates of 1 per cent decline on reported basis while margin improved by 40 basis points sequentially to 24.5 per cent in line with estimates. Deal win TCV at $10.2 billion has shown uptick, above the company’s normalised deal win TCV of $7-9 billion is encouraging,’’ Shaji Nair, research analyst, Capital Market Strategy, Mirae Asset Sharekhan, said.
``The commentary on early signs of revival in discretionary spending in some verticals is positive and is likely to set a good undertone for calendar year 2025,’’ he added.
During the quarter, TCS witnessed a drop in employee strength. The total base stood at 607,354 against 612,724 in the preceding period — a decline of 5,370 employees.
Milind Lakkad, chief HR officer, said the company was on course to make 40,000 campus hirings in this fiscal and that the employee addition will be more in the next fiscal.
At its board meeting on Thursday, the directors recommended an interim dividend (its third during the fiscal) of ₹10 per share and a special dividend of ₹66 per share.
