TCS vs Techm Q1 FY26

TC

TCS

Q1 FY26 · Information Technology

TCS reported Q1 FY26 revenue of INR 63,437 crore (+1.3% YoY) but constant currency revenue declined 3.1% YoY, reflecting intensified discretionary spending delays and project deferrals. Operating margin was 24.5%, down YoY due to capacity buildup and demand contraction. Total contract value was robust at $9.4 billion (+13.2% YoY), yet revenue conversion lagged. Management noted that international revenue should improve in FY26 vs FY25, but near-term visibility remains low due to trade uncertainty. Key risk: if trade deals are delayed, client decision-making may remain sluggish, further pressuring Q2 revenue.

Guidance read

International revenue to improve in FY26 vs FY25: Management expects constant currency international revenue to be better in FY26 than FY25, though overall growth aspiration remains high. Q2 revenue likely better than Q1 if no further delays: CEO stated Q2 should be at least better than Q1 if no additional project delays occur. Margin improvement levers: utilization, productivity, pyramid: CFO cited improving utilization, productivity, and pyramid as key levers to improve margins from current levels.

Risk read

Key risks include Trade deal uncertainty delaying client decisions — CEO noted that until most trade deals are announced, lack of clarity will persist, potentially delaying decision-making further.; Excess capacity weighing on margins — CFO acknowledged carrying excess capacity due to demand contraction, which may pressure margins until growth resumes.; BFSI Europe weakness and large engagement completion — Decline in BFSI Europe was partly due to completion of a large engagement, with structural delays also contributing.; New BSNL order ramp-up uncertain — Advance purchase order received but circle-wise POs awaited; execution timeline and margin impact unclear..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.

Tech Mahindra reported Q1 FY26 revenue of INR 13,351 crore, up 2.7% YoY, with PAT of INR 1,141 crore, up 30% YoY. EBIT margin expanded 60 bps QoQ to 11.1%, marking the seventh consecutive quarter of margin expansion. Growth was driven by Communications, BFSI, and Retail verticals, while Manufacturing and Hi-Tech declined. Large deal TCV stood at $809 million, up 44% YoY on an LTM basis. Management expects revenue momentum to improve from Q2 as deal wins convert, but flagged ongoing uncertainty in Auto and Hi-Tech due to tariffs and client-specific cuts. The FY27 margin target of 15% remains intact, though growth assumptions may be revisited if macro worsens. Key risk: sustained weakness in Manufacturing and Hi-Tech could delay revenue recovery.

Guidance read

FY26 revenue to be better than FY25: Management expects FY26 revenue growth to exceed FY25 levels, driven by deal conversions and stabilization in key verticals. FY27 margin target of 15% remains intact: Despite macro uncertainty, the company reaffirms its FY27 EBIT margin target of 15%, contingent on growth assumptions. Revenue growth to improve from Q2 FY26: Large deal wins from previous quarters are expected to start contributing to revenue from Q2 onwards. Effective tax rate of ~27% for FY26: CFO guided that the effective tax rate for FY26 will be around 27%, normalizing from a one-time refund in Q4.

Risk read

Key risks include Sustained weakness in Manufacturing and Auto verticals — Tariff uncertainty and client spending cuts continue to pressure the Manufacturing vertical, which declined 4% YoY.; Hi-Tech vertical headwinds from semiconductor client restructuring — A key semiconductor client implemented sharp budget cuts and workforce reductions, causing a 3.3% YoY decline in Hi-Tech.; Revenue growth may not materialize as expected — Despite strong deal wins, revenue momentum has lagged; management's expectation of improvement from Q2 may be delayed if macro worsens.; Margin target dependent on growth assumptions — CFO acknowledged that the FY27 margin target of 15% assumes a certain growth trajectory; if growth disappoints, margins may be revisited..

Promise ledger

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