Tata Consultancy Services Q1 Revenue Falls Short of Expectations

Tata Consultancy Services (TCS) has reported Q1 revenue that missed expectations, with net sales of $5.4bn, down 2.2% YoY. The company's IT services segment accounted for 99% of net sales, while sales of IT equipment and software licenses made up the remaining 1%. The bank-financial services-insurance sector accounted for 40% of net sales, followed by telecoms and media at 16.5%. Geographically, India accounted for 5.7% of net sales, while the Americas accounted for 51.3%.

Tata Consultancy Services (TCS) has reported its Q1 revenue that fell short of analyst expectations, with net sales of $5.4 billion, down 2.2% year-on-year (YoY). The company's IT services segment accounted for 99% of net sales, while sales of IT equipment and software licenses made up the remaining 1%. The bank-financial services-insurance sector accounted for 40% of net sales, followed by telecoms and media at 16.5%. Geographically, India accounted for 5.7% of net sales, while the Americas accounted for 51.3% [1].

The results underscore the ongoing challenges in the IT services sector, with clients exercising restraint in their technology investments due to economic uncertainties. Despite the revenue shortfall, TCS's EBIT margins remained stable at 24.3%, indicating operational efficiency. The company's strong deal pipeline and robust order book in North America are expected to drive growth in the coming quarters [1].

International business growth is a key factor to monitor for TCS. During the March quarter, TCS’ international business grew by 0.6% on a sequential basis in constant currency terms. Goldman Sachs expects a 1% growth in the first quarter, with the management indicating that FY26 will be better for the international business compared to FY25 [1].

Deal wins have been a significant driver for TCS. In the first quarter of FY25, TCS reported deal wins of $8.3 billion, up from $8.6 billion in the previous quarter. The company's strong performance in the bank-financial services-insurance sector and the Americas has been instrumental in maintaining its revenue momentum [1].

The company's stock has been trading flat ahead of the earnings announcement, with analysts maintaining a positive outlook. The majority of analysts (70%) have a "buy" rating on TCS, indicating confidence in the company's long-term prospects [1].

TCS's management is expected to provide insights into the company's performance and outlook during the earnings call. Investors will be closely watching for updates on deal wins, hiring trends, and international business growth, which will be crucial for the company's future performance [1].

References:
[1] https://www.cnbctv18.com/market/earnings/tcs-q1-results-live-updates-earnings-revenue-growth-margin-deal-wins-cc-dividend-hiring-fy26-outlook-liveblog-19634789.htm