TCS Q4 Results: Profit drops, claims to weather tech demand storm with AI adoption; annual revenue crosses $30 bn

Biswajit Maity, Sr Principal Analyst at Gartner, said, “TCS achieved a 6% year-over-year revenue growth in Q4, primarily driven by growth in the Energy, Resources and Utilities, Manufacturing, Consumer Business Industry sectors, and Regional Markets. Despite encountering several challenges, including global uncertainties, federal budget reductions, decreased discretionary spending, and intensified global competition, TCS effectively managed its financial posture. Additionally, the company's deal acquisitions are expected to remain steady. TCS has established itself as a strategic provider across nearly all industries. Gartner believes TCS will remain a valuable partner for clients, with its strategy well-aligned with market demands and clients’ digital transformation goals.

There is a positive outlook for 2025, with the industry anticipating a return to double-digit growth, fuelled by ongoing digital transformation initiatives and the growing impact of Generative AI, which 57% of providers see as a key growth driver. TCS reported an average attrition rate of 13.3%, which is slightly higher than the previous quarter. TCS must carefully track its employee turnover, as a high workload can occasionally negatively impact the overall performance quality, particularly when attrition is gradually rising QoQ.”

In the post earnings press conference, Milind Lakkad, Chief HR Officer, said, “Attrition has inched up a bit to 13.3 per cent in this quarter. We are ok because our quarterly annualised attrition has come down this quarter by 130 basis points. So, we should be ok.”

TCS appointed Mangesh Sathe as Chief Strategy Officer with effect from 1st May 2025. Mangesh will also head the Global Consulting Practice and oversee the M&A functions of the company. Mangesh Sathe most recently was the Chief Executive Officer of Tata Strategic Management Group (TSMG) at Tata Sons. He has extensive experience across sectors such as Automotive and Industrial, Consumer, and Technology.

Both Aarthi and Mangesh will report to K Krithivasan, Chief Executive Officer and Managing Director.

TCS partnered with Vantage Towers, Europe’s second-largest telecom tower operator with a network of 86,000 sites, to launch a digital service platform aimed at transforming the experience of property owners that lease land for telecom tower installations. The partnership aims to streamline service processes for property owners, enhance retention, and strengthen telecom site partnerships for Vantage Towers across Europe. TCS will also deploy TCS Crystallus™ for Telecom, an industry-specific offering designed to accelerate digital transformation.

TCS signed an agreement to modernize the depository system of Muscat Clearing and Depository (MCD), Oman’s central securities depository. TCS will implement TCS BaNCSTM for Market Infrastructure and QuartzTM to future-proof MCD’s operations.

Banking, Financial Services and Insurance: Rs 24,257 crore

Manufacturing: Rs 6,395 crore

Consumer Business: Rs 10,146 crore

Communication, Media and Technology: Rs 11,022 crore

Life Sciences and Healthcare: Rs 6,491 crore

• Revenue at Rs 64,479 crore, +5.3% YoY (CC: 2.5%)

• Growth led by Regional Markets (+22.5%), ERU (4.6%), and BFSI (+2.5%) YoY

• Operating Margin: 24.2%

• Net Margin: 19.0%

• Strong Cash conversion: Operating Cash Flow 125.1% of Net Income

• Record Q4 TCV at $12.2 billion, Book-to-bill ratio of 1.6

• Final Dividend (proposed): Rs 30 per share, to be approved at the Annual General Meeting

Milind Lakkad, Chief HR Officer, TCS, said “Our trainee onboarding in FY25 was 42,000 as planned. We won the Enterprise-Wide Top Employer Certification from the Top Employers Institute. This milestone builds on TCS’s achievements as a Global Top Employer for 2025, marking an unbroken record of receiving this distinction over a decade. We continue to enjoy the pride of place as the employer of choice, and the industry-best retention rate by prioritizing a culture of professional and personal growth, wellbeing, and purpose-driven engagement for our associates.”

As on March 31, 2025, TCS applied for 8,816 patents, including 267 applied during the quarter, and has been granted 4,820 patents including 235 granted during the quarter.

TCS declared a final dividend of Rs 30 per equity share of Rs 1 each of the company. In a regulatory filing, the company said, “We would like to inform you that at the Board Meeting held today, the Directors have recommended a Final Dividend of INR 30 per Equity Share of INR 1 each of the Company which shall be paid/dispatched on the fifth day from the conclusion of the 30th Annual General Meeting, subject to approval of the shareholders of the Company.”

Emkay Global said, “IT companies should again report a muted quarter, as clients continue to restrict discretionary spending, coupled with the seasonal weakness. We expect large caps to report lackluster QoQ revenue growth owing to weak discretionary spending and company-specific issues – TCS (BSNL ramp down), HCLT (software business seasonality, Verizon deal anniversary impact, completion of a large transformation deal with a retail client), WPRO (ramp down of some projects), INFO (lower pass-through). Select midcaps are expected to outperform yet again, and report sequential growth of 1.2% to 12.4% compared with -1.5% to 0.2% (USD growth) for large caps. LTTS, PSYS, ECLX, MPHL, and COFORGE would lead the growth in mid-caps, while SSOF, BSOFT, and CYL would log sequential decline in revenue.”

According to Kotak Institutional Equities, key metrics to watch for include:

Hiring: It is still a good indicator of the current demand scenario. We expect headcount decline across many companies in the quarter.

GenAI impact: A large hyperscaler forced many vendors to price in AI-efficiency into the pricing model. Adoption of such a stance by a wider set of clients will be keenly watched. In addition, strength of GenAI practice across many companies and ability to retain part of the efficiency will be the area of focus.

TCV of deal wins: This number has slowed down due to lower number of mega-deals in the market. Companies have highlighted that ACV has picked up, raising hopes of a recovery in discretionary spending. This will be an area of focus.

In March, Nasdaq-listed IT services major Accenture had reported its fiscal second quarter earnings report with revenue at $16.7 billion, up 5 per cent in US dollar terms and 8.5 per cent in local currency. This was in line with the company’s guided range of $16.2 billion to $16.8 billion. Accenture had said that the new bookings for the second quarter of fiscal 2025 stood at $20.91 billion, down 3 per cent YoY in US dollar terms and flat in local currency.

It has also narrowed its full-year revenue growth outlook to 5-7 per cent in local currency and continues to expect foreign exchange impact of approximately negative 0.5 per cent.

Accenture had reported the possibility of future order bookings narrowing after indications of spending cut by the US Govt. However, most analysts highlighted that unlike Accenture, Indian IT companies do not have any significant exposure to US Federal government contracts. Most believe that the situation is unlikely to worsen further unless the macro economic parameters deteriorate further.

The Trump administration has increased tariffs significantly on several countries, which could lead to higher inflation and slower economic growth globally with an increased risk of recession in the US and other developed economies. Additionally, responses by target countries toward US tariffs can alter the tariff scene significantly in the near term, leading to a highly uncertain macro environment. Kotak Institutional Equities said, “Uncertainty at the beginning of the year would lead to deferral of decisions and impact growth in the crucial and seasonally strong quarter of June. This new reality would mean that FY2026 could now end up being worse than FY2025 for many of the companies. A recession means that the downside risks in stocks exist, while a slowdown leads to reasonable upsides.”

At an 18% downside in FV to CMP, Kotak Institutional Equities said, “TCS fares better than other stocks. Following TCS, Infosys, HCLT and Coforge also have relatively lower downside (19-21%) compared to CMP. The downside in FV compared to the base-case FV at 35-38% is higher for TechM, Coforge, LTIM and Infosys due to a mix of factors such as (1) higher exposure to discretionary spending, (2) higher exposure to retail and manufacturing verticals, (3) client-specific issues and (4) turnaround and lower management stability likely to pose additional challenges during a recession. The FV cut is steep for Coforge at 38% and LTIM at 36%, yet the downside is lower due to the already sharp correction in market price YTD.”