Tata Consultancy Services (TCS), the country’s largest IT services firm, on Thursday missed estimates on both revenue and profit fronts, underlining continued caution among global clients amidst a challenging macroeconomic environment.
The company’s consolidated net profit rose 4% sequentially to Rs 12,380 crore, missing Bloomberg’s estimate of Rs 12,534 crore. Revenue declined by 0.4% sequentially to Rs 63,973 crore, falling short of the estimate of Rs 64,748 crore.
Operating margins stood at 26.6% against 26% in the second quarter, driven by cost management and favourable currency movements. Total contract value (TCV) of new deals came in strong at $10.2 billion, a significant jump from $8.6 billion in Q2FY25.
TCS announced a third interim dividend of Rs 10 per share and a special dividend of Rs 66 per share, with a record date of January 17 and payment date set for February 3.
The decline in revenue was largely attributed to the seasonal weakness in Q3, when client operations typically slow down due to holidays. While major markets such as North America and continental Europe remained under pressure, growth markets like India (up 70.2%) and West Asia & Africa (up 15%) showed resilience. However, North America declined 2.3% and continental Europe saw a contraction of 1.5%.
Among verticals, energy, resources and utilities grew by 3.4%, and consumer business gained 1.1%. The key segment – banking, financial services and insurance (BFSI) – reported a modest sequential growth of 0.9%, compared to 0.1% in Q2.
Chief executive officer K Krithivasan highlighted the robust deal pipeline, stating, “We are pleased with the excellent TCV performance in Q3, which was well-rounded across industries, geographies and service lines. BFSI and consumer business groups returning to growth, alongside early signs of revival in discretionary spend, lend visibility to long-term growth”.
He added, “The majority contribution of growth in India and regional markets came (from projects) other than BSNL. We see that the BSNL deal has reached its peak and will start tapering, possibly from Q4.”
On the likely impact of the recent H-1B rules overhaul, the management said they have a strong global model in place, which reduces their dependence on H-1B. So, they will treat it as business as usual until there is a further development.
Chief financial officer Samir Seksaria noted the company’s strong cost management, saying, “In a quarter marked by significant cross-currency volatility, TCS delivered healthy margin improvement and free cash flows. Investments in talent and infrastructure will continue to support long-term growth. The rupee’s depreciation against the dollar was lower than the other major basket of currencies. Our consistent hedging policy is something which helped us. It’s a policy where we limit the exchange volatility through a consistent hedging programme, protecting our revenue.”
The company’s total headcount fell by 5,370 employees during the quarter, reversing the addition of 5,762 employees in Q2FY25. Total employee strength stood at 607,354 as of December 31, 2024. Attrition edged higher sequentially to 12.3%.
Chief HR officer Milind Lakkad emphasised the company’s commitment to upskilling, stating, “We promoted over 25,000 associates this quarter, bringing total promotions this financial year to over 110,000. Our campus hiring remains on track, and we plan to onboard a higher number of recruits next year”.
TCS shares declined nearly 1.5% on the BSE ahead of the earnings announcement, closing at Rs 4,046. Analysts cited the revenue miss and flat sequential growth as key concerns but noted positives in deal wins and operating margin improvement.
“Revenue growth was below expectations, but the strong order book and margin expansion are encouraging,” said Piyush Pandey, analyst at Centrum Broking. “These factors could aid a turnaround in the US market in the coming quarters,” he said.
TCS, being the first major IT firm to report Q3 earnings, sets the stage for peers like Infosys, Wipro and HCLTech, who are scheduled to announce results next week. The broader IT services sector continues to navigate global uncertainties, including high interest rates, geopolitical tensions and fluctuating client sentiment.
Analysts said that while TCS’ Q3 performance reflects ongoing challenges in its major markets, the company’s strong order book and disciplined cost management provide a foundation for optimism. However, sustained revival in client spending, especially in North America and Europe, remains critical for future growth.