Tough start for FY26 for TCS; Q1 profit rises 6 pc on non-core income amid sluggish topline growth | Company Business News

Mumbai, Jul 10 (PTI) Country’s largest IT services company TCS on Thursday reported a 6 per cent growth in June quarter net profit at ₹12,760 crore, helped by a jump in non-core income even as revenues grew at a tepid pace.

The rupee revenue grew 1.3 per cent to ₹63,437 crore during the quarter, but was down by over 3 per cent on a constant currency basis, as the company faced headwinds in its major markets amid a winding down of the BSNL deal which helped it in recent quarters.

The other income for the company, which is the first major player to report the April-June performance, jumped to ₹1,660 crore from ₹962 crore last year, courtesy an one-time write-back of income tax paid earlier, which helped the company’s bottomline.

Its managing director and chief executive K Krithivasan said it is experiencing a “demand contraction” due to the continuing uncertainities on the macroeconomic and geopolitical fronts, and added that he does not see a double-digit revenue growth in FY26.

In what may constitute as a change to earlier commentary, the CEO said he expects the international revenues to fare better in FY26 as compared to the year-ago period. In April, the company had said that the overall revenue growth in FY26 will be better than FY25.

Speaking to reporters at its office here, Krithivasan explained the delays in decision making experienced in the preceding quarter have “intensified” now, and hoped for the discretionary spends — a prime mover of revenue growths for IT companies — to return once the uncertainities ebb.

There are positive signs with the trade deals being signed by the US and also some challenging of the legislations going through in its largest market, he said, hoping for some clarity on the aspects restraining clients from spending by end of this month or early August.

The operating profit margin narrowed to 24.5 per cent as against 24.7 per cent in the year-ago period, even as the wage hikes — which typically crimp the margins — are yet to set in.

Its chief of human resources Milind Lakkad said the company is yet to decide on its wage hikes, and added that it is maintaining its fresher hiring target as of now.

Chief financial officer Samir Seksaria said the company continues to aspire for pushing the operating profit margin into the 26-28 per cent level and added that it is taking into account all the facets as it chases the aspirational level.

It signed new deals of USD 9.4 billion during the quarter, Krithivasan said, adding that the ongoing difficulties are inhibiting clients from signing up for cost optimisation deals and instead go for cost optimisation ones.

The pipeline across service lines continues to be strong and the pricing is also stable at an overall level, though there may be some aberrations, the TCS management said.

Revenues from the banking, financial services and insurance industry — the largest contributor by domains — grew by just 1 per cent, while the largest geography of North America saw a 2.7 per cent contraction.

India revenues de-grew 21.7 per cent and now form 5.8 per cent of the overall pie as against 7.5 per cent in the year-ago period, largely because of the winding down of the over ₹15,000-crore BSNL deal. Krithivasan said the company has won an add-on work of ₹2,900 crore for the state-owned telco, but it is waiting for the work to begin.

Its newly appointed chief operating officer Aarthi Subramanian said there is interest in the AI offerings, but declined to specify the revenue bookings on the same. She said agentic AI is also featuring strongly in client conversations, especially in specific solutions like business process services (BPS).

In comments that come days ahead of Capgemini’s over USD 3.3-billion acquisition of BPS major WNS to bolster AI capabilities, Krithivasan said TCS has expanded its horizon on merger and acquisitions, but stressed that any deal it signs has to be value-accretive.

If the company finds a target which will help it gain size, or, give access to talent and technologies, it will go ahead with it and if not, the Tata Group’s cash cow will give back the additional money to shareholders in pre-determined ratios, the CEO said.

The company board on Thursday announced an interim dividend of RS 11 per equity share.

The overall headcount was at 6,13,069 at the end of the quarter, up by over 6,000 on-year and over 5,000 over-quarter. However, the attrition inched up to 13.8 per cent, which Lakkad termed as outside of comfort level.

The company scrip had closed 0.06 per cent down at ₹3,382.30 apiece on the BSE, as against a 0.41 per cent correction on the benchmark.