TCS's first-quarter revenue falls short of expectations, according to the CEO's remarks, who also indicates a possible contraction in demand.
**Tata Consultancy Services Reports Lower-Than-Expected First-Quarter Revenue**
Tata Consultancy Services (TCS), India's largest IT services company, reported lower-than-expected first-quarter revenue of 634.37 billion rupees ($7.40 billion), falling short of analysts' estimate of 646.66 billion rupees. Despite this, the company's net profit rose 6% in the three-month period to 127.60 billion rupees, surpassing the analysts' estimate of 122.16 billion rupees.
The revenue decline can be attributed to uncertainty around U.S. tariffs, according to TCS CEO K Krithivasan. He stated that "The continued global macro-economic and geo-political uncertainties caused a demand contraction." Sagar Shetty, research analyst at StoxBox, echoed this sentiment, stating that "Deal wins remained muted, with client losses in larger contracts and flattish margins."
The softness in U.S. and European markets raises demand concerns, as two in five tech executives have deferred discretionary projects due to uncertainty around U.S. tariffs. TCS's total order bookings stood at $9.4 billion during the quarter, down from $12.2 billion in the previous quarter and $8.3 billion in the year-ago period.
However, the profit increase was due to a wage hike delay and a jump in other income. TCS's shares listed in Mumbai closed 0.1% lower ahead of the results. The revenue growth was 1.3% year-on-year, with growth in banking and financial services (1%) and tech services (1.8%).
TCS is the first Indian tech major to report results for the quarter. HCLTech and Infosys are expected to report their results next week and the week after that, respectively. Despite the revenue shortfall, TCS's performance highlights the resilience of the IT sector in the face of global economic challenges.
The IT industry is not immune to the impact of global economic conditions, currency fluctuations, market competition, and demand uncertainty. These factors can lead to reduced spending by clients, impacting revenue. Geo-political uncertainties and shifts in client demand can also impact revenue growth. In the case of TCS, the uncertainty around U.S. tariffs seems to have played a significant role in the revenue decline.
Overall, TCS's first-quarter results underscore the challenges faced by the IT sector in the current economic climate. However, the company's profit growth suggests that it has been able to navigate these challenges effectively, providing a glimmer of hope for the sector's future performance.
Business analysts attribute the revenue decline of Tata Consultancy Services (TCS) to uncertain global macro-economic conditions, particularly concerning U.S. tariffs, affecting technology-related business sectors. Despite this, the company's finance sector showed resilience, with a 6% increase in net profit in the first quarter.
