Shares of Tata Consultancy Services (TCS) surged 6 percent on January 10 as investors bet on early signs of demand revival and strong deal wins in Q3. The information technology company not just reported its highest third-quarter order book in five years, but also exhibited confidence to deliver stronger growth in CY25 and FY26.
At 12:25 pm on January 10, TCS' shares on NSE were trading 6% higher at Rs 4,281 apiece.
At the end of the October-December period, TCS' total contract value (TCV) stood at $10.2 billion, reflecting a surge of 25.93 percent year-on-year and 18.6 percent sequentially. This strong TCV performance was achieved even without factoring in the contribution from its mega deal with BSNL, and despite Q3 typically being a seasonally weak quarter.
“We are pleased with the excellent TCV performance in Q3 which was well-rounded across industries, geographies and service lines lending good visibility to long-term growth. BFSI and CBG returning to growth, continued stellar run of Regional Markets and early signs of revival in discretionary spend in some verticals give us confidence for the future,” K Krithivasan, Chief Executive Officer and Managing Director of TCS said.
Meanwhile, deal conversion cycles also shortened along with a improvement in the mix of wins, which makes the management much more confident of a revival of discretionary demand. Taking on the upbeat outlook, brokerages also cheered, with Nuvama calling the management's commentary the most positive in two years.
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The optimism stemming from upbeat demand outlook also spilled over its peers, also since TCS was the first IT major to detail its earnings. Strong buying was seen across other IT names as well which lifted the Nifty IT index over 2 percent higher, making it the best performing sector in trade today.
Aside from that, TCS reported a consolidated net profit of Rs 12,380 crore for Q3, marking a 4 percent sequential rise from Rs 11,909 crore in the previous quarter, slightly above estimates. On the other hand, consolidated revenue for the quarter stood at Rs 63,973 crore, largely flat compared to the previous quarter and falling short of expectations.
A Moneycontrol poll of seven brokerages had projected TCS’ net profit at Rs 12,308 crore and revenue at Rs 64,218 crore for the October-December period.
With the ramp-up of the BSNL deal, the company's operating margins improved 40 basis points sequentially, coming at 24.5 percent in Q3. The management had rolled out a margin guidance of 26-28 percent for FY25 and hopes to reach closer to that range by the next quarter.
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