Release Date: January 09, 2025
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 strong total contract value (TCV) of $10.2 billion for the quarter, with significant contributions from North America and BFSI sectors.
- The company achieved a year-over-year revenue growth of 4.5% in constant currency, demonstrating resilience despite seasonal challenges.
- Operating margin improved sequentially by 40 basis points to 24.5%, showcasing effective cost management and operational efficiency.
- The company announced a substantial dividend of INR76 per share, reflecting its commitment to returning capital to shareholders.
- Tata Consultancy Services Ltd (BOM:532540) observed early signs of revival in discretionary spending, particularly in BFSI and Retail sectors, indicating potential for future growth.
Negative Points
- Revenue growth in key markets such as North America and Europe declined by 2.3% and 1.5% respectively, indicating regional challenges.
- The Life Sciences Healthcare and Communication and Media segments experienced significant declines of 4.3% and 10.6% respectively, impacting overall performance.
- Headcount declined during the quarter, raising concerns about the company's ability to scale operations in line with growth expectations.
- The BSNL contract, a significant revenue contributor, is expected to taper off, posing a potential headwind for future revenue growth.
- Despite strong deal wins, the conversion of these deals into revenue has not met expectations, suggesting potential execution challenges.
Q & A Highlights
Q: Kriti, despite strong deal wins in FY24, growth in '25 hasn't met expectations. Do you think the nature of deal wins this time will lead to better conversion?
A: Yes, the deal wins in '24 were strong, but some projects were deferred or slowed down. We are seeing early signs of revival in discretionary spending, which, along with strong TCV wins, gives us confidence for CY25 and FY26. - K. Krithivasan, CEO
Q: The headcount has declined despite a positive outlook. Why is this happening, and will you hire more during the year?
A: While there is a long-term correlation between headcount and growth, quarter-on-quarter variations can occur. We added significant headcount in Q1 and Q2, and optimized in Q3 due to seasonality. This is not a reflection of demand. - K. Krithivasan, CEO
Q: This quarter had the best deal wins ever. Was there any slippage from previous quarters?
A: Every quarter has some deals that slip into the next, but this quarter's wins were organic with no specific bunching from previous quarters. - K. Krithivasan, CEO
Q: How is the mega deal pipeline looking now?
A: We are working on a few mega deals, and the number of large deals has improved this quarter. - K. Krithivasan, CEO
Q: Can you elaborate on the early signs of revival in discretionary spending?
A: Deal wins have increased across BFSI, CBG, and other verticals, with Europe showing strong performance. We see more deals in application modernization, cloud, and data projects. There's also a reduction in deal cycle time, indicating improved decision-making. - K. Krithivasan, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
