TCS vs Techm Q1 FY25

TCS reported a steady Q1 FY25 with revenue of INR 62,613 crore (+5.4% YoY) and operating margin of 24.7% after absorbing annual wage hikes. Net profit stood at INR 12,038 crore (19.2% margin). Growth was broad-based across markets and verticals, with India surging 61.8% YoY and manufacturing up 9.4%. However, North America declined 1.1% YoY and BFSI remained weak. The order book was $8.3 billion, with AI/GenAI pipeline doubling to $1.5 billion. Management maintained that FY25 will be better than FY24 but refrained from calling sustained growth due to ongoing client uncertainty. Key risks include delayed decision-making in North America and BFSI, and potential impact from GCC insourcing trends.

Guidance read

FY25 better than FY24: Management reiterated that FY25 will be better than FY24 in terms of revenue growth, but declined to provide specific numbers. Operating margin aspirational band of 26-28%: CFO Samir Seksaria reaffirmed commitment to the 26-28% operating margin band, with levers including productivity, utilization, and pricing. Campus hiring target of ~40,000 trainees: CHRO Milind Lakkad indicated that the company aims to hire close to 40,000 trainees in FY25, consistent with historical practice.

Risk read

Key risks include Sustained weakness in North America and BFSI — North America revenue declined 1.1% YoY and BFSI remained negative YoY, with management citing ongoing client uncertainty and delayed decision-making.; Order book lumpiness and delayed closures — Q1 TCV of $8.3B was below the $12.4B in Q4, with some large deals slipping to Q2, indicating volatility in deal closures.; Dependence on BSNL for India growth — Analyst questioned whether India's 61.8% YoY growth was largely BSNL-driven, raising concerns about sustainability of growth outside this deal..

Promise ledger

Of 1 tracked promise, management 0 met, 0 close, 1 missed.

Tech Mahindra reported Q1 FY25 revenue of ₹13,005 crore, down 1.2% YoY, with EBIT margin expanding 110 bps QoQ to 8.5%, driven by Project Fortius cost savings. PAT stood at ₹851 crore (6.5% of revenue). Growth was led by manufacturing (+6.4% YoY) and healthcare (+6.1% YoY), while communications declined due to Comviva seasonality. Deal wins totaled $534 million, up 6.8% QoQ, diversified across verticals. Management highlighted early turnaround progress with focus on margin over revenue, but flagged continued telecom weakness and BFSI volatility due to small portfolio size. Guidance remains cautious: no wage hikes planned near-term, with margin levers expected to sustain improvement even in flat demand. Risk: telecom recovery may be slower than anticipated, and BFSI gains are from internal efforts rather than demand uptick.

Guidance read

No wage hikes in near term; revisit in H2: Management communicated no wage hike currently, will reassess in second half of FY25 based on financial performance. Margin improvement levers sufficient even in flat demand: Management stated they have enough internal levers to improve margins even without revenue growth, prioritizing margin over revenue. Effective tax rate expected 26%-27% for FY25: CFO guided that normalized effective tax rate for the year will be in the range of 26%-27%.

Risk read

Key risks include Telecom recovery may be slower than expected — Management noted telecom sector remains challenged; while decline moderated to single digits, no immediate upturn is expected.; BFSI volatility due to small portfolio size — Management acknowledged that BFSI vertical is relatively small, so a few million dollars can cause quarter-to-quarter volatility.; Potential disruption from GenAI on BPS contact center business — Analyst raised concern that BPS contact center services may be first impacted by GenAI; management downplayed but admitted contact center is under 5% of revenue.; Unexpected furloughs in high-tech sector — Analyst asked about unseasonal furloughs; management confirmed one or two clients but said not material or widespread..

Promise ledger

Scorecard data is being built as historical quarters are processed.