Mumbai: Tata Consultancy Services posted a 6% profit increase to Rs 12,760 crore in Q1 2025 despite a 3.1% currency-adjusted revenue decline, driven by macroeconomic challenges and cautious client spending, while expanding AI capabilities and workforce to navigate market headwinds.
Tata Consultancy Services (TCS), one of India’s leading IT services companies, reported a mixed set of financial results for the first quarter ending June 2025. The company posted a consolidated net profit of Rs 12,760 crore, reflecting a 6 per cent increase from Rs 12,040 crore achieved in the same period last year. Revenue rose modestly by 1.3 per cent to Rs 63,437 crore compared to the previous year, although on a constant currency basis, revenue declined by 3.1 per cent year-on-year.
The company’s operating margin expanded slightly to 24.5 per cent, up 30 basis points quarter-on-quarter, signalling resilient profitability despite external pressures. The board also recommended a dividend of Rs 11 per share.
TCS CEO K Krithivasan attributed the revenue softness to the challenging macroeconomic and geopolitical environment, specifically pointing to demand contraction caused by global uncertainties and reduced client spending, especially amidst concerns like U.S. tariffs. He highlighted that despite these headwinds, the company saw robust deal closures and growth in new services. Krithivasan emphasised TCS’s focus on helping clients navigate difficulties through cost optimisation, vendor consolidation, and AI-led business transformation.
The company’s AI and Data unit showed meaningful progress as enterprises advanced from pilot projects to scaled deployment of generative AI solutions. TCS has been heavily investing in its AI platform “WisdomNext” and expanding its AI capabilities, including agentic AI. The AI workforce with advanced skills surpassed 114,000 employees, underscoring TCS’s leadership in enterprise AI solutions. Executive Director-President and COO Aarthi Subramanian noted a strategic shift among clients from use-case focused implementations to ROI-led scaling of AI, with investments spanning infrastructure, data platforms, AI agents, and business applications.
From an industry standpoint, growth was uneven across sectors and geographies. Emerging markets such as India, Latin America, and the Middle East and Africa saw double-digit growth, with manufacturing leading key industries with 9.4 per cent constant currency growth, followed by energy, resources and utilities, and life sciences and healthcare. In the banking and financial services sector, North America was a significant growth driver. However, four out of six business verticals experienced a decline. Total order bookings also declined to $9.4 billion from $12.2 billion in the previous quarter, indicating cautious client spending.
TCS has been maintaining a strong focus on employee growth and retention amid these market challenges. The workforce grew by over 5,000 employees during the quarter to a total of 613,069 associates. Attrition rates, while still notable, trended down to 13.8 per cent over the last 12 months, reflecting ongoing investments in sustainable growth and employee engagement.
Financially, TCS benefitted from higher other income and deferred wage hikes, which helped net profit surpass forecasts despite revenue misses. The company ended the quarter with steady margins and strong cash conversion, positioning it well for future strategic investments.
The stock market responded with subdued sentiment; TCS shares were marginally down following the results and remain down approximately 26 per cent from their 52-week high, reflecting broader investor caution.
Overall, while TCS showed resilience in profitability and strategic positioning in AI-led transformation, the company faces ongoing headwinds from global economic uncertainties, cautious client spending, and mixed industry performance. Its ability to innovate in AI and maintain strong client engagement will be key to navigating the uncertain terrain ahead.
Source: Noah Wire Services
