TCS beat analyst estimates but reported the slowest full-year revenue growth in four years

Bangalore: The revenue season for the IT industry began with a grim note, and while India’s IT leaders reached the slowest full-year revenue growth in four years, revenue and profits also increased in the fourth quarter despite beating analyst expectations.

TATA Consulting Services provided $30.2 billion in revenue for fiscal 25, down 3.78% year-on-year. The last time TCS’ slower growth was in March 2021, when it grew at 0.7%. The result is in the context of the company, which burns due to uncertainty about trade tariffs, and thus squeezes out the discretionary expenses of its close fist customers in its largest geographical location (North America).

To be sure, the top line of the company at the Mumbai-based company beat Bloomberg’s 47 analysts, predicting revenue of $29.6 billion in fiscal 25. Meanwhile, the company’s fourth-quarter revenue fell 0.98% in turn to $7.47 billion.

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While full-year net profit increased slightly by 2% to $5.7 billion, net profit for the January-March quarter fell 2.74% to $1.42 billion, according to analysts’ expectations. Much of this decline is due to lower operations in major geographical locations such as North America and Europe. In fiscal 25, TCS received 51.2% or $14.5 billion in full-year revenue from its North American customers.

“Our expertise in AI and digital innovation, coupled with unparalleled knowledge of the customer environment and globally, has given us a pillar of support for our customers in this environment of macroeconomic uncertainty,” TCS CEO K. Krithivasan presented a press conference on Thursday’s deal to the company’s revenue.

The number of TCS is dominated by a surge in India’s operations, and traditionally a small market accounted for 8.6% of its revenue in FY25. Local businesses contributed 88% of the company’s incremental revenue, for fiscal year 25 ($29.1 billion in fiscal year 24).

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The agreement with state-owned telecom operator BSNL, a $1.83 billion contract played a big role. The company will build a data center for BSNL in part of its 4G network deployment order that it won in May 2023.

Another focus of the company is its profitability, reducing 30 basis points to 24.3%. A basis point is a percentage point of one percentage point. This goes against the TCS trend. Historically, TCS’ profitability peaked at the end of the fiscal year as it was the only major outsourcing for the only IT outsourcing to wage hikes at the beginning of the fiscal year, thus limiting the impact of hiking to the first six months of the fiscal year (April to September).

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In terms of personnel, the company’s net increase was 6,433 employees, ending the finances with 607,979 employees. Employees are a key determinant of the demand environment of the IT services industry. The increase in recruitment or increased employee numbers indicates a higher demand for technical services, while cutting employee signals reduces the business of software service providers.

Meanwhile, the global corporate and economic environment is becoming more blurred. U.S. President Donald Trump imposed tariffs on imports from his trading partners on April 2, and a week later, taxed them for 90 days. This vision leads to market considerations due to uncertainty.

This uncertainty is bad news for IT services companies, as Indian IT outsourcing revenues took a hit when Fortune 500 companies blocked their spending.

The double blow comes in the form of AI because it can affect 40% of the company’s business, including work related to customer support, application development and maintenance.

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Genai threatens to swallow IT outsourcers’ work, as new technologies can automate human tasks, thus reducing the dependence on humans on certain types of work. TCS, like its own peers, does not solicit revenue from Genai.