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Informist, Thursday, Jul. 10, 2025

By Anjana Therese Antony and Sunil Raghu

MUMBAI/AHMEDABAD – Tata Consultancy Services Ltd., India's information technology behemoth, said the delay in decision making by clients in terms of discretionary spending continued in the June quarter due to the uncertain macroeconomic environment, primarily on concerns about the US tariff policies. "This trend has continually intensified to some extent in this quarter and global businesses are disrupted due to conflicts, economic uncertainty and supply chain issues," Chief Executive Officer K. Krithivasan said in a post-earning press conference in Mumbai.

In the previous quarter, too, the company had raised similar concerns, particularly after the US came up with sweeping tariffs on its key trading partners in February. This had and still worries export-oriented companies in India, including those in the information technology sector, as these earn a major chunk of their revenue from the US. Revenue of TCS from North America declined 2.7% on year in the reporting quarter in constant currency terms. Also, its revenue contribution from the region declined to 48.7% in the June quarter from 49.5% in the year-ago period. 

It is very difficult to quantify the impact of what is happening in the US on the company's growth, Krithivasan said. "...if you look at the industries, for instance, consumer industry is more impacted by tariff, manufacturing, auto industry is more impacted by tariff." However, certain industries such as banking saw only little impact because of "consumer competencies", the chief executive officer said. "It will be very difficult to quantify X percentage to the RoI (Return on Investment) given a product situation."

However, he remains optimistic and confident that the revenue from its international business in 2025-26 (Apr-Mar) will be better than the previous year. It will be too early to call out when growth will resume, which, to a great extent, depends on more clarity from the macroeconomic scenario, he said. "I think things should be clear towards the end of July or early on."  

Amid elevated risks associated with tariffs and hazy outlook on the macroeconomic environment, the company reported its biggest sequential fall in its top line in five years -- down 1.6%. The Mumbai-based company's consolidated revenue was lower from the previous quarter at INR 634.37 billion, also failing to meet the Street's expectation of INR 646.50 billion. However, its INR-127.60-billion net profit beat the consensus estimate of INR 121.79 billion by a wide margin. Even though the top line declined, the slightly better operating margin pushed the bottom line growth, which was up 4% sequentially.

TCS' operating margin for the quarter improved by 30 basis points sequentially to 24.5%. This was supported by the fall in third-party expenses and the depreciation of the dollar against most mega currencies, Chief Financial Officer Samir Seksaria said. "...we have a stable hedging program which helps us at least hedge our balance, the short-term volatility, which will come in the coming quarters." 

The ramp-down in Bharat Sanchar Nigam Ltd.'s deal it had won in 2023 acted as one of the tailwinds for improvement in its margin. The company had got an INR-150-billion fourth-generation rollout project for the telecom major, which incurred third-party expenses. "The margins on them, these are lower than our existing margins," Seksaria said. 

The company's domestic revenue declined 21.7% on year in constant currency terms in the June quarter. Revenue contribution from India declined to 5.8% of its total sales from 7.5% a year ago. The company attributed this decline to the ramp-down of the BSNL deal. "If you take BSNL out, our service has actually had a strong growth," Kritivasan said. 

The company said it has BSNL's advance purchase order and is waiting for the final purchase order. In May, the company had got an INR-29.03-billion add-on advance purchase order from BSNL. This was for planning, engineering, supply, installation, testing, commissioning, and annual maintenance of fourth-generation mobile network at 18,685 sites, it had said. 

DEALS, CLIENTS

TCS said it saw good addition of clients in the $10-million, $5-million, and $1-million categories. The customer base in the $1-million category increased by 26 from the previous year to 1,336 in the reporting quarter. However, the number of clients in the $100-million-plus mark declined by 1 to 62, Kritivasan said during the press conference. 

The chief executive officer also said the company had a strong order book closure. "Our order book for the quarter stands at $9.4 billion, up by 13.2% on a year-on-year basis." The company's total contract value of business in North America was $4.4 billion and consumer operations was $1.6 billion, he said. The company also said pricing has been largely stable and that there was no pressure on pricing. 

HUMAN RESOURCE

Speaking about hiring, the IT giant said it does not expect any reduction in hiring due to the rise in use of artificial intelligence programs. As of Jun. 30, it had a total of 613,069 employees and net added 6,071 employees from the year-ago period. However, its trailing 12-month attrition rose to 13.8% from 13.3% in the previous quarter. 

The company also said no decision has been taken about wage hikes yet. If the macroeconomic environment improves, and as a result if the company's business improves, "We will definitely give the best possible hikes we normally give," it said. 

ARTIFICIAL INTELLIGENCE

The company also said it sees strong demand for artificial intelligence projects for enterprise modernisation. Agentic AI is also becoming a part of client conversations, Chief Operating Officer Aarthi Subramanian said. "...all of you will agree that this (agentic AI) is something that is a term that is fairly new, about maybe six-to-eight months since we started hearing about it. But what is interesting is it is becoming part of all our current conversations," she said.

Subramanian also said the company has started building its own agentic AI solutions. Revenue from AI-related projects has grown during the quarter, she said. 

In April, Subramanian was appointed as the company's president and chief operating officer for five years. She was the chief digital officer at Tata Sons. 

The company released its quarterly results after market hours Thursday. Its shares closed at INR 3,382 on the National Stock Exchange, down 0.1%.  End

US$1 = INR 85.63

Edited by Deepshikha Bhardwaj

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