TCS posts Q1 revenue growth of 5.4%, beats analyst estimates

Conditions remain volatile, warns CEO, as firm declares dividend of Rs 10 a share.
Last Updated : 11 July 2024, 11:29 IST

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Bengaluru: India’s largest IT services company Tata Consultancy Services (TCS), posted a revenue growth of 5.4 per cent for the April-June (Q1FY25) quarter and beat Dalal Street estimates on back of improvement in the United Kingdom and Indian markets.

However, the company warned that conditions remained volatile and uncertain going ahead, even as most of its key verticals saw improvement. It announced a dividend of Rs 10 per share.

As per the earnings numbers, released on Thursday, TCS’ Q1 revenue came in at Rs 62,613 crore. Net profit rose to 8.7 per cent to Rs 12,040 crore, consolidated operating margin stood at 24.7 per cent, an expansion of 150 basis points year-on-year, while net margin stood at 19.2 per cent.

The software exporter remained hesitant on sustenance of growth across verticals.

“We are hesitant to call out sustained market growth because we do find market conditions volatile. Customers do take decisions at a very short notice based on what they perceive on the market conditions and other sentiments,” said K. Krithivasan, Chief Executive Officer and Managing Director, in the post-earnings media briefing.

TCS also reported a positive net headcount addition of 5,452, the first time in three quarters that hiring has outstripped attrition for the company. TCS hired 11,000 trainees in the first quarter of FY25 with a significant fall in the attrition rate, which stood at 12.1 per cent. The company said attrition rate is expected to stabilise around these levels for the rest of the year.

While the IT behemoth’s North America market saw a decline, the UK market posted a strong growth of 6 per cent on a year-on-year basis. “On the other hand, India contributed to a major chunk of revenue growth of the Mumbai-based software company,” said Mahantesh Sabarad, independent market expert.

The sequential growth in banking, financial services and insurance (BFSI) vertical for North America was a positive, the CEO said. “However, for it to reflect on a yearly basis, because it's a trailing number, it’ll take a few more quarters,” said Kirthivasan. Additionally, TCS kept its outlook unchanged for the full financial year (FY25).

During the press conference, the IT major’s CEO also highlighted the growing client demand for AI as well as cyber security and said that these themes continue to attract more attention. However, this demand was dictated by global clients more than their Indian counterparts.

“Clients prioritised initiatives that are making their products and services smarter, uplifting productivity while transcending the next Gen technology levers like GenAI, IoT and others,” he said.

Themes across key deals involved operating model transformation, vendor consolidation, legacy modernization, customer experience, digital workplace services, and AI/GenAI initiatives, while Cloud, Cyber Security and Enterprise Solutions led the growth in the quarter, added Kirthivasan.

Published 11 July 2024, 11:29 IST

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