TCS Q2 Result: Profit up 5%, operating margin slips; 5 key highlights from TCS earnings

TCS Q2 result: India's IT major, Tata Consultancy Services (TCS), on Thursday, October 10, reported a tepid 5 per cent year-on-year (YoY) rise in its net profit for the July-September (Q2) quarter as cautioous trends seen in the last few quarters continued. The company saw a decent rise of about 8 per cent in its revenue, while its operating margin contracted slightly on a YoY basis.

“We saw the cautious trends of the last few quarters continue to play out in this quarter as well. Amidst an uncertain geopolitical situation, our biggest vertical, BFSI, showed signs of recovery. We also saw a strong performance in our Growth Markets," said K Krithivasan, Chief Executive Officer and Managing Director.

“We made strategic investments this quarter in talent and infrastructure to ensure sustainable growth. Our disciplined execution resulted in superior cash conversion. Our longer-term cost structures remain unchanged, and we remain confident in our ability to continue delivering industry-leading profitable growth,” said Samir Seksaria, Chief Financial Officer, TCS.

According to the company's exchange filing, cyber security, AI.Cloud and TCS Interactive led the growth in the September quarter.

"While discretionary spending was impacted, clients continued to invest and see improved outcomes using AI/GenAI. We are setting up interdisciplinary AI offices/CoEs to strategize, prioritize and implement AI at scale," said TCS.

The company also announced a dividend of ₹ 10 per share. The record date for this purpose is October 18, and the dividend payment date is November 5.

Let's take a look at five key highlights of TCS' Q2FY25 scorecard:

1. TCS Q2 key numbers

TCS reported a consolidated net profit of ₹11,909 crore for Q2FY25 against a profit of ₹11,342 crore in the same quarter last year. This marks a 5 per cent YoY growth in profit.

Revenue from operations for the quarter under review came at ₹64,259 crore, up 7.7 per cent YoY against the profit of ₹59,692 crore in Q2FY24. In constant currency (CC) terms, the company's revenue grew 5.5 per cent.

The company said its operating margin for the quarter was 24.1 per cent, while its net margin was 18.5 per cent. Operating margin saw a 0.2 per cent YoY decline.

2. Performance of key domains

Among the key domains, BFSI, which was in negative last quarter, saw a 0.1 per cent YoY growth in CC terms. Moreover, 'Consumer Business' and 'Life Sciences & Healthcare' each rose 0.1 per cent YoY.

'Energy, Resources and Utilities' and 'Manufacturing' domains saw healthy growth, rising 7 per cent and 5.3 per cent YoY, respectively, in CC terms.

On the other hand, the 'Communication & Media' segment saw a 10.3 per cent YoY degrowth. The technology and services domain also declined 1.9 per cent YoY in CC terms.

3. Strong performance of growth markets

Among markets in different regions, the Indian market saw solid growth during the last quarter. According to the company's exchange filing, the Indian market grew 95.2 per cent YoY in CC terms.

Barring the North American market, which grew 2.1 per cent YoY, markets across geography saw healthy gains, with Middle East & Africa (up 7.9 per cent YoY), Asia Pacific (up 7.5 per cent YoY), Latin America (up 6.8 per cent YoY) and the UK (4.6 per cent YoY) witnessing decent growth.

4. Headcount

The company's total workforce strength at the end of the quarter was 6,12,724 and it added as many as 5,726 employees during the quarter. IT services’ attrition stood at 12.3 per cent for the last twelve months.

In the first half of the current financial year, the company added more than 11,000 employees.

“We welcomed 11,000 associates in the first half of the year and remain on track for trainee onboarding as planned. We have also commenced the campus hiring process for FY26. Our strong talent base and increased learning intensity prepare us well for the complex technology transformations that customers entrust us with,” said Milind Lakkad, Chief HR Officer, TCS.

5. Key deal wins

TCS sealed several deals in the last quarter. Here are some of the major ones:

(i) Expanded partnership with Rolls-Royce to advance its sustainable initiatives and involves research into hydrogen fuel system technology.

(ii) ASDA partnered with TCS to enhance its IT operations by streamlining its IT infrastructure service landscape.

(iii) Follett Higher Education, North America’s leading college store operator, selected TCS to strengthen its information technology infrastructure and cybersecurity services.

(iv) Entered a strategic partnership with Mansfield Building Society in the UK to digitally transform its business.

(v) George Yang-led Golden Arches Development Corporation (GADC), the master franchise holder of McDonald's in the Philippines selected TCS to standardize and digitize the IT operations for its 760+ restaurants.

(vi) Openreach, the UK’s largest telecom infrastructure company, has selected TCS as its strategic partner for the business operation transformation of their national roll-out of next-gen fibre networks.

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