2025-04-10T21:20:15.000Z

BENGALURU: In a recent earnings call, K Krithivasan, the CEO of Tata Consultancy Services (TCS), expressed a blend of caution and optimism regarding the company's performance amidst a shifting demand landscape. TCS has successfully eclipsed the $30 billion revenue mark for the fiscal year 2025 (FY25), marking a significant milestone for one of the largest IT services firms globally. According to the reports, TCS's revenue experienced a growth of 4.2% in constant currency for FY25, a notable increase from the previous years growth of 3.4%.

However, despite this overall upward trend, the company faced a slowdown in growth during the March quarter. The growth rate dipped to 2.5%, a stark contrast to the previous quarters, which recorded 3.6% and 5.5% respectively. The drop in growth can be attributed to a tightening of discretionary spending by clients as well as delays in decision-making processes. Krithivasan noted, Overall, while we had a de-growth of 0.8% on a sequential basis, all the major markets and most industry verticals grew. This suggests that while the overall quarterly figures reflect challenges, there are pockets of growth within TCSs diverse operations.

Despite the slowdown, Krithivasan maintained a forward-looking perspective, highlighting that the companys order book and recent contracts suggest that the fiscal year 2026 (FY26) could outperform FY25. Until February, we were quite positive and very optimistic about the quarter. However, in March, we started seeing some uncertainty creeping in, resulting in some project and decision-making delays, he elaborated. Notably, the CEO reassured stakeholders that there have not been any significant project cancellations, although some projects are experiencing ramp-downs.

The North American market, which is crucial to TCS as it contributes approximately 50% of the companys total revenue, reported a decline of 1.9% in growth for the March quarter, and a similar 1.8% for the entire financial year. This decline highlights the challenges faced even in key markets, emphasizing the need for strategic adjustments to navigate the changing economic landscape.

Additionally, the companys operating margins saw a slight decline, dropping to 24.2% in the March quarter from 24.5% in the previous December quarter. TCS's Chief Financial Officer (CFO) Samir Seksaria reiterated the company's target operating margin range of 26-28%, indicating a focus on profitability even amid growth challenges. The fiscal outlook remains cautiously optimistic as TCS navigates the complexities of the current market environment.

In conclusion, while TCS faces certain short-term uncertainties, the leadership team is preparing for a rebound in FY26, with a focus on leveraging existing contracts and enhancing decision-making efficiencies to drive growth.