Analyst Concall
TCS says delay in clients' decision making in Q1 to ease Q2
This story was originally published at 22:13 IST on 10 July 2025
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--TCS: Pharma sector clients grappling with quality, supply chain challenges
--CONTEXT: TCS management's comments in post-earnings call with analysts
--TCS: Deal pipeline continues to be healthy
--TCS: Continue to scale our workforce on AI
--TCS: FY26 intl revenue in constant currency terms may be better vs FY25
--TCS: Client decision delays may ease Q2 vs Q1 but need to wait and watch
--TCS:Lack of clarity for clients to remain till all US trade deals announced
--TCS: Second phase of BSNL order may only slightly impact margin
--TCS: Overall margin seen improving hereon despite headwinds
--TCS: Mkt share in N America intact, but delays, ramp-downs hurting growth
By Rajesh Gajra and J. Navya Sruthi
NEW DELHI/MUMBAI – The trend of delays in decision making by clients in terms of discretionary spending which intensified in the June quarter due to uncertainties in world macroeconomics may ease sequentially in the September quarter, but "we need to wait and watch", the management of Tata Consultancy Services Ltd. told analysts and investors in a post-earnings call. The information technology behemoth's management said until all trade deals between the US and other countries are finalised and announced, there will be a lack of clarity for its clients worldwide.
However, the company was confident that revenue from international operations in constant currency terms will be better in 2025-26 (Apr-Mar) compared with FY25. TCS' consolidated revenue from operations for the June quarter fell 1.6% on quarter to INR 634.37 billion, the worst growth rate in 20 quarters, amid sharp contraction in demand, particularly from international clients. The consolidated net profit of the company increased 4.4% on quarter to INR 127.60 billion.
On the Bharat Sanchar Nigam Ltd. deal, the management said the second phase of the deal is likely to impact the margins slightly as and when the execution takes place. But despite such headwinds, the overall portfolio-level margin is expected to improve, the management said. Commenting on some sectors where its clients operate in, the company's managing director and chief executive officer, K. Krithivasan said the pharmaceutical sector is grappling with crisis, supply chain challenges, and quality issues.
On the issue of artificial intelligence, Aarthi Subramanian, executive director – president and chief operating officer at TCS said the company continues to scale up their workforce on AI, and deepen AI and data partnerships across hyper-scalers, and native AI and data companies. For example, she said, a "New York-based multinational property and casualty insurance company chose TCS to develop a solution using large language model to extract this information, generate quotes against the competition and create a personalized summary." This new solution reduced the time for quote extraction and generation for 30 minutes to five minutes, Subramanian added.
The management said despite delays or ramp-down by clients in North America, which hit the revenue growth in the June quarter, the company has not lost any market share in that region which contributes significantly to overall revenue.
The management said it wants to drive revenue growth in the September quarter through operating levers at its disposal such as available capacity in terms of recently enhanced employee strength and optimisation. The deal pipeline continues to be healthy and well distributed across verticals and geographies, according to the management.
To a question from an analyst on why despite deal wins over the last three quarters and a good order book, the company was seeing negative surprises on demand, particularly in the June quarter, the management said there were multiple factors at play. Some clients had delayed the order execution or extended the duration of the deal, while some cut down on the number of issues that were engaged in the order. The order pipeline should ideally rotate but in the last few quarters the conversion to revenue has not been in line with expectations, the management said.
Thursday, shares of TCS ended near flat at INR 3,382 on the National Stock Exchange. End
Edited by Akul Nishant Akhoury
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