Post-earnings Conference
Seasonality, soft demand marred on-quarter revenue growth in Oct-Dec, says TCS mgmt
This story was originally published at 20:38 IST on 9 January 2025
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--TCS MD: Macro factors of Jul-Sept continued in Oct-Dec
--CONTEXT: Comments by TCS management at post-earnings press conference
--TCS MD: Order book closure at $10.2 bln Dec 30 gives us confidence
--TCS MD: Negative sequential growth in revenue in most geographies Oct-Dec
--TCS MD: Seeing early signs of revival in discretionary spends
--TCS MD: Seasonal headwinds, soft discretionary demand hit Oct-Dec sales
--TCS MD: Almost all verticals saw total contract value go up Oct-Dec
--TCS: Oct-Dec India revenue growth contributed by non-BFSI verticals
--TCS: Our GenAI adoption slowly becoming more purposeful
--TCS MD: See impact of AI to be positive at gross level
--TCS: In wait-and-watch mode for growth in healthcare vertical
--TCS: Don't expect GenAI to cut jobs, doing lot of staff training on GenAI
By Rajesh Gajra
NEW DELHI – Seasonal weakness and soft discretionary demand environment in the December quarter resulted in most verticals and markets seeing sequential negative revenue growth for Tata Consultancy Services Ltd., Managing Director and Chief Executive Officer K. Krithivasan told reporters at a post-earnings press conference Thursday. The consolidated net revenue from operations of TCS for Oct-Dec declined 0.5% on quarter to INR 639.73 billion, the decline being a first in 18 quarters.
Krithivasan said that in Oct-Dec the company saw macroeconomic factors of the previous quarter "continuing, coupled with the seasonality". Among key segments, the life sciences and healthcare vertical continued to record negative growth sequentially as well as on year. "Healthcare is something where there is a wait-and-watch mode... because that is very policy-dependent in the US market," the chief executive officer said.
In the December quarter, the company's life sciences and healthcare segment revenue declined 3.1% on quarter to INR 64.26 billion. The company's biggest segment--banking, financial services, and insurance--recorded sequential revenue de-growth of 1.3% to INR 234.81 billion. Consumer business segment revenue was flat at INR 100.35 billion, while the revenue of the communication, media, and technology segment declined by 0.8% to INR 119.89 billion. The manufacturing segment of the company recorded revenue of INR 61.94 billion, down 1.8% on quarter.
In terms of geographies, revenue from the North America market declined marginally by 0.24% on quarter, with the region making up for 47.7% of the company's total revenue. The company's India revenue, which was 9.8% of total revenue in Oct-Dec, recorded growth of nearly 10% sequentially, notwithstanding a deceleration in revenue from major client BSNL Ltd. which has got ramped down over the past couple of quarters. Krithivasan said the company's India revenue growth for the December quarter was driven by all verticals barring banking, financial services, and insurance.
The TCS CEO was, however, optimistic about the next 12 months, going by the comfort derived from conversations the company was having with clients recently, "early signs of revival in discretionary spends", and the size of the company's order book. The yearly trend seen is of improvement in discretionary spending by clients, and this is likely to increase in 2025, he said.
The order book closure, or total contract value of outstanding orders, at the end of the December quarter was $10.2 billion, which, according to Krithivasan, gave the company confidence. "Almost all verticals saw total contract value (of outstanding orders) go up" in Oct-Dec, he said.
On the issue of generative artificial intelligence, the TCS management said the company's adoption was gradually becoming purposeful in contracts with clients. The management said the impact of AI will be positive at a gross level, though some jobs will require a change in profile. TCS does not expect generative AI to cut jobs in the company, and the management said it was undertaking a lot of training in generative AI for the employees.
On Thursday, shares of TCS ended 1.7% lower at INR 4,038.85 on the National Stock Exchange. End
Edited by Rajeev Pai
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