Tata Consultancy Services, the first information technology company to release its earnings for the October-December period, highlighted witnessing reduction in deal cycles in Q3. "While deal wins were also strong in calendar year (CY)2024, there were deferrals or slowdown in some projects. However, in Q3, we saw a better mix of deal wins along with a shortened deal cycle which makes us confident over the early signs of discretionary demand revival in CY25 and FY26," K Krithivasan, Chief Executive Officer and Managing Director said in the post-earnings call.
Krithivasan shared his optimism surrounding the shift in deal win dynamics in Q3, while also forecasting stronger performance from TCS in CY25 and FY26 versus that seen in CY24.
Adding to that, Krithivasan also pointed other factors like easing interest rates softening inflation and reduced political uncertainty in the US after the presidential elections as other factors that will steer a revival in discretionary demand.
TCS reported its highest third-quarter order book in the past five fiscal years, with a total contract value (TCV) of $10.2 billion for the period ending December 31. Despite the seasonally weak quarter for the IT industry due to the holiday season in key markets like North America, the TCV was up 25.93 percent from $8.1 billion in the same period last year and 18.6 percent higher compared to the previous quarter.
What's more encouraging is that this TCV factors no contribution from TCS' mega-contract with BSNL, the management revealed in the post-earnings call. Meanwhile, the TCV performance in Q3 was also well-rounded across industries, geographies and service lines, providing good visibility to long-term growth, Krithivasan said.
All verticals saw deal wins as compared to the last quarter, with an improved mix as clients look for optimisation through technologies like Gen AI, and automation. Most large deals have a component of Gen AI in it and we expect it to bring more business going ahead, TCS management said.
"Looking at the order book and conversations with customers, discretionary spending is likely to increase. We saw the growth in North America and BFSI segments as positive signs of discretionary spending revival," Krithivasan added.
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