TCS Q1 results meet estimates: Net profit rises 9% on-year to Rs 12,040 crore; Rs 10 dividend declared

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Tata Consultancy Services (TCS) Q1 FY25 results met street expectations, with the consolidated net profit rising 9 percent year-on-year to Rs 12,040 crore. India’s largest IT company’s April-June revenue from operations rose 5.4 percent on-year to Rs 62,613 crore. Moneycontrol had projected a profit of Rs 11,999 crore on a revenue of Rs 62,190 crore, based on an average of 10 brokerage estimates.

TCS Q1 results showed that the company’s margins took a hit due to the wage hike cycle during the quarter. The EBIT margin or the operating margin narrowed to 24.7 percent for Q1, a 130 basis points fall from 26 percent in the previous quarter; in line with the Moneycontrol estimate of 24.7 percent. EBIT is short for earnings before interest and taxes.

The company's board also approved an interim dividend of Rs 10 per share for the quarter.

TCS added 5,452 employees in Q1 taking the total workforce to 6.07 lakh. The company's attrition rate stood at 12.1% on last twelve-month (LTM) basis.

"We are continuing to expand our client relationships, create new capabilities in emerging technologies and invest in innovation, including a new AI-focused TCS PacePort in France, IoT (Internet of Things) lab in the US and expanding our delivery centers in Latin America, Canada and Europe,” TCS CEO K Krithivasan said in a statement.

Samir Seksaria, Chief Financial Officer, said: “In spite of the usual impact of the annual wage increments in this quarter, we have delivered strong operating margin performance, validating our efforts towards operational excellence."

"We remain focused on making the right investments in R&I and talent, strengthening our superior return ratios and creating long term value for our stakeholders,” he added.

The company reported total contract value of $8.3 billion in Q1, which has declined both on a YoY and sequential basis. In Q4, TCS had witnessed record high quarterly order book of $13.2 billion.

Geographically, demand was led by India market which grew 61.8% YoY in CC terms, followed by MEA growing 8.5% YoY CC, Asia Pacific at 7.6% YoY CC and Latin America grew 6.3% YoY in CC. Largest markets including North America grew declined 1.1% in CC YoY, UK grew by 6% in CC YoY and Continental Europe grew only 0.9% in CC YoY.

Among verticals, BFSI which accounts for 30-40% of the company's revenue continued to decline YoY by 0.9% in CC terms, along with consumer business degrowing 0.3%, technology services declining by 3.9% and communication and media declining by 7.4% respectively.

Surprisingly regional markets continued to grow 37.7% YoY in CC terms, Manufacturing grew by 9.4%, Life Sciences and Healthcare grew by 4% and Energy Resources and Utilities grew 5.7% YoY.