Release Date: October 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tata Consultancy Services Ltd (BOM:532540, Financial) reported a year-on-year revenue growth of 7.6% in INR terms for Q2 FY25.
- The company's operating margin for the quarter was 24.1%, with a net margin of 18.5%.
- The BFSI vertical showed signs of recovery, contributing positively to the company's performance.
- TCS's Ignio cognitive automation software suite saw 34 new deals and four go-lives, indicating strong demand for AI and automation solutions.
- The company reported a strong order book with a total contract value (TCV) of $8.6 billion for the quarter.
Negative Points
- North America experienced a revenue decline of 2.1%, impacting overall growth.
- The technology and services segment saw a decline of 1.9%, while communication and media declined by 10.3%.
- The operating margin declined sequentially by 60 basis points due to higher third-party expenses and investments in talent and infrastructure.
- The company faced client-specific challenges in the life sciences and healthcare sectors, impacting revenue.
- The demand environment remains cautious, with discretionary spending and deal closures experiencing delays.
Q & A Highlights
Q: Could you elaborate on the demand environment and whether it has deteriorated after a couple of promising quarters?
A: The demand continues to focus on cost optimization, with discretionary spend remaining stable. BFSI in North America has shown improvement, and while there are client-specific challenges in life sciences and healthcare, the overall environment is similar to the previous quarter. - K. Krithivasan, CEO
Q: Can you provide more details on the financial services segment and the manufacturing sector's concerns?
A: In BFSI, banking and insurance are showing growth, while capital markets are weaker. Manufacturing is facing short-term supply chain and labor issues, but the long-term outlook remains strong due to a healthy order book. - K. Krithivasan, CEO
Q: How should we think about growth visibility beyond the current calendar, especially in the absence of mega deals?
A: The TCV is within our comfort range, and the pipeline is strong across geographies and industries. While mega deals are absent, the pipeline remains robust, indicating potential for growth acceleration. - K. Krithivasan, CEO
Q: What is the impact of the BSNL deal on revenue and margins, and how will it affect future quarters?
A: The BSNL deal is currently at its peak, and we expect it to taper down after a quarter. This will impact both revenue and margins, with potential margin tailwinds in the fourth quarter. - Samir Seksaria, CFO
Q: How is the GenAI pipeline converting to bookings and revenue, and what is its impact on margins?
A: GenAI engagements have doubled, with 86 projects going into production this quarter. While many projects are small, some larger, long-term projects are emerging. We aim to reach our 26-28% margin target as soon as possible. - K. Krithivasan, CEO and Samir Seksaria, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
