TCS Q1 preview: CEO Krithivasan faces litmus test amid macro clouds, slow growth-OxBig News Network

Less than a year later, the country’s largest information technology (IT) outsourcer changed its tune. Not only did it hire a new COO, it also hired a chief strategy officer to chart a new growth path. On 10 April the Mumbai-based company named Aarthi Subramanian as president and chief operating officer, and Mangesh Sathe as chief strategy officer. While Subramanian was group chief digital officer at Tata Sons, Sathe served as chief executive of Tata Strategic Management Group, where he supported group CEOs in strategy and transformation initiatives.

The two appointments come on the back of slow performance and a lack of big-ticket deals under Krithivasan, who completed two years as CEO on 1 June. For one, TCS, which has seen growth decline in the past three years, reported the slowest growth amongst the country’s top three IT firms in FY25. It also failed to bag a single contract valued over a billion dollars last year, raising more questions about revenue prospects.

The company’s growth has been powered by a single client for the past two years. Bharat Sanchar Nigam Limited, the state-run telecom firm, awarded TCS a billion-dollar contract in July 2023 to design and install 4G networks. TCS is not expected to get much incremental business from the telecom operator after the June quarter, having received a follow-on purchase order in May. Analysts have said it runs the risk of seeing revenue decline this fiscal year, with no client offsetting the BSNL revenue loss.

US President Donald Trump’s tariff war is making it harder for companies to source materials from other countries to run their businesses. The country’s $283-billion IT outsourcing industry is not insulated from this, as those very companies are their clients.

However, TCS has another set of issues to deal with as well.

Over the past two years the company has lost key accounts to competitors, partly due to account leaders leaving, and the poor quality of graduates. Confusion about the right approach for generative AI isn’t helping assuage investors’ concerns either. The company merged and demerged its AI and cloud business in less than a year.

Investors haven’t exactly been gung-ho on TCS. The company’s shares declined 15.58% in the first six months of 2025, the most amongst its top three peers. Infosys Ltd’s and HCL Technologies Ltd’s shares fell 14.82% and 9.94%, respectively. The BSE Sensex gained 6.82% in this time.

Clearly, Krithivasan’s two years have at best been average. As TCS kickstarts earnings season, investors will eye the company’s roadmap and whether help from its two new lieutenants will be enough to improve on it its FY25 growth.

Mint takes a close look at five probable talking points during TCS’s earnings announcement tomorrow.

1. Demand outlook

The primary concern for TCS is the demand outlook in the face of macroeconomic uncertainty, which is forcing clients to pull back their tech spending. With BSNL not expected to significantly swing the revenue needle, as much as 90% of the company’s revenue, which comes from its international business, will be under fire.

TCS does not offer revenue guidance but its commentary on the demand outlook will be followed closely as other Indian IT outsourcers may track TCS’s commentary when they announce their earnings starting next week. Peer Accenture’s commentary on “significantly elevated levels of uncertainty” does not signal a bright path ahead either.

Analysts have said uncertainty in the market may push back revenue from accounts that were expected to scale up in the three months to June. Management’s commentary on client behaviour and translation to revenue, especially from the international business, will be tracked closely.

2. Revenue

TCS ended Q4FY25 with $7.47 billion of revenue, down 1% sequentially. This was its second consecutive quarter of declining revenue, and analysts don’t expect things to improve much. At least two of the five brokerages expect TCS to end with a sequential revenue decline. The remaining three do not expect sequential growth of more than 1.7% in the quarter.

Kotak Institutional Equities analysts Kawaljeet Saluja, Sathishkumar S, and Vamshi Krishna said in a note dated 30 June that they expect TCS to end with a 0.4% sequential revenue decline in constant currency terms. The analysts added, “The focus will be on reasons for struggle for growth in the international business despite strong deal wins.”

Banks and financial institutions make up almost a third of the company’s revenue. Last year TCS got less business from Citigroup Inc. and Postbank, a subsidiary of Deutsche Bank AG, than it did in FY24. Both Citibank and Deutsche Bank, which collectively fetched TCS about $150 million last year, are among its 30 largest clients. This gap in revenue from two of its marquee clients is expected to hurt the company’s biggest cash cow and how it plans to feed the beast will be followed closely.

3. Profitability

TCS typically starts the year with relatively low operating margins, which then increase throughout the year. But this time around its margins are not expected to take a hit it has not announced the date and quantum of wage hikes. Traditionally, the company rolls out hikes in the first quarter of the fiscal and most of its impact is absorbed in the months before September. This also suggests the company is looking to guard its market-leading profitability of 24.3% even when growth prospects appear bleak.

4. Hiring

As macroeconomic uncertainty looms large, IT outsourcers are expected to get less work, leading to a need for fewer employees, be it from campuses or within the organisation. Add to this genAI-led automation and no wage hikes this quarter, and the company’s plans to increase its headcount could face a triple whammy.

The top brass may provide a forecast on fresher hiring plans for the year during the earnings announcement. TCS added 6,433 employees at the end of the last fiscal year, the most among the country’s top five IT firms, to close the year with 607,979 employees.

5. Gen AI

TCS does not call out revenue or orders from gen AI unlike its larger peer Accenture, which has received $7.1 billion in total orders from gen AI since September 2023. TCS chairman N Chandrasekaran, in his 2024 address to shareholders at the release of the company’s annual report, called gen AI the “single most transformative force”. He said it represented not just another tech cycle but a civilisational shift. Yet, TCS still lacks a clear roadmap for harnessing the technology.

On the other hand, Accenture has merged its strategy, consulting, technology, operations, and marketing divisions into a new business unit called reinvention services, to embed data and AI easily into their client’s systems. TCS’s commentary on gen AI will thus be followed closely.