Demand for services stays strong, but there's increasing sense of caution: TCS chief executive

Tata Consultancy Services' total contract value (TCV) for the second quarter of FY23, which ended on September 30, was $8.1 billion. This was in line with the management's guidance of a TCV run rate of $7-9 billion per quarter. Last quarter, the order book was $8.2 billion and at the same time last year, it was $7.6 billion.

While speaking to the press, CEO Rajesh Gopinathan stated that there is an increasing sense of caution, that the environment is difficult, and that they must remain vigilant.

In terms of client spending, he said that they will learn about next year's budgets three to six months later.

Gopinathan added that the demand for services continues to be strong. "Our order book is holding up well, with a healthy mix of growth and transformation initiatives, cloud migration, and outsourcing engagements," he said, adding that there is an increasing sense that they need to be wary of uncertainties.

He added that there were no mega deals during this quarter, and while they did secure a few deals in the range of $400 million, it was spread out across sectors.

COO NG Subramaniam said that demand is good across all geographies and verticals, but there is some softness that is to be expected, especially when it comes to long-term deals or decisions. In Europe, he said, a lot of people are thinking about how this winter will be, and it's safer to expect some softness.

Marks & Spencer, Zurich Insurance, Nokia, and Boots were among the key deals won this quarter.

TCS' key sectors, including retail and BFSI, are currently facing a challenging business environment due to inflation, rising interest rates, a hit to the banking sector's mortgage loan sub-segment, resulting in consumers losing purchasing power, and several other ongoing macro uncertainties, particularly in the top two markets, the US and Europe.

TCS's growth in major markets was led by North America, which increased 17.6 percent year on year in constant currency, followed by continental Europe (14.1 percent) and the United Kingdom (14.8 percent). In emerging markets, India grew 16.7 percent, Latin America grew 19 percent, the Middle East and Africa grew 8.2 percent, and the Asia Pacific grew 7 percent.