TCS surpasses estimates, signals encore for others
NEW DELHI: Tata Consultancy Services, India’s largest IT services firm, kicked off the earnings season for the sector by closing FY24 with a better-than-expected March quarter. As the company beat analyst expectations, managing director and chief executive K. Krithivasan stated that the company expects the current fiscal to be better for TCS, signalling a reversal from a downtick for the entire IT services industry through FY24. The company reported net revenue of $7.36 billion for the January-march quarter, up 1.1% sequentially—in line with analyst expectations of up to 1.5% growth. Net profit for the fourth quarter was $1.5 billion, up 6.4% sequentially. While growth was labelled by industry experts as “strong”, analysts signalled caution due to key sluggish metrics across the company’s largest contributing businesses and geographies.
North America, which contributes to half of TCS’S net revenue, saw revenue decline by 2.3% year-on-year in the March quarter, and by 20 basis points for the full year. Growth was driven by a 10.1% y-o-y increase in revenue from the UK and a 20.2% growth in India revenue, which collectively account for 22.1% of the TCS’S net revenue.
In terms of segments, BFSI, which contributed the largest share of TCS’ revenue (32%), declined 1% year-on-year. Manufacturing, and life sciences and healthcare, were the top performing businesses for TCS in FY24, growing 7.3% and 4.8%, respectively. Together, the two verticals accounted for 19.5% of the company’s overall revenue.
TCS also reported a 150 basis point expansion in operating margin in the final quarter of FY24, at 26%. Growth during the period was largely driven by its $1.83-billion digital transformation contract with state-run telecom operator, Bharat Sanchar Nigam Ltd (BSNL).
“At the start of the quarter, we had expected our quarterly revenue growth to be higher by 50-100 basis points. But this did not happen due to uncertainties in the market, and decisions being taken at very short notices,” said Krithivasan, adding that he wasn’t disappointed with the overall growth.
Net revenue for FY24 grew 4.1% to $29.08 billion, which is one of the lowest annual revenue growths that TCS has ever reported.