TCS vs Techm Q2 FY25

TCS reported Q2 FY25 revenue of INR 64,259 crore, up 7.6% YoY, with constant currency growth of 5.5%. Operating margin declined 60bps sequentially to 24.1%, impacted by a large transformational project and talent investments. BFSI showed signs of recovery, especially in North America, while life sciences and healthcare faced client-specific headwinds expected to stabilize by Q3. Deal TCV was $8.6 billion, with a strong pipeline near all-time highs. Management remains cautiously optimistic on discretionary spend recovery but flagged near-term pressure in manufacturing and telecom. Key risk: client-specific scope reductions and prolonged macro uncertainty could delay growth acceleration.

Guidance read

Life sciences headwinds to stabilize in Q3, return to growth in Q4: Client-specific headwinds in life sciences and healthcare are expected to stabilize in Q3 and return to growth in Q4. BSNL deal peak revenue to continue for one more quarter, then taper: The BSNL transformational program is at peak revenue; expected to remain at similar levels for one more quarter before tapering. Margin aspiration to exit Q4 at 26%: Management aspires to exit Q4 FY25 at 26% operating margin, similar to Q4 FY24 exit. Growth markets as long-term growth driver: TCS is investing significantly in India, APAC, Latin America, and Middle East & Africa as sustainable long-term growth drivers.

Risk read

Key risks include Client-specific scope reductions in life sciences — A large life sciences client abruptly reduced scope, causing revenue decline. Recovery depends on client's future investment decisions.; Prolonged weakness in telecom and manufacturing — Telecom and manufacturing verticals face structural headwinds; telecom due to CapEx caution, manufacturing due to labor and supply chain issues.; BSNL deal tapering could create revenue gap — The BSNL deal revenue is at peak and expected to taper after Q3, potentially creating a growth headwind in H2.; Margin pressure from growth market investments — Growth markets have lower margins; scaling them may pressure overall margins until volumes improve..

Promise ledger

Scorecard data is being built as historical quarters are processed.

Tech Mahindra reported Q2 FY25 revenue of INR 13,313 crore (+3.5% YoY) and EBIT margin of 9.6% (+110bps QoQ), driven by Project Fortius savings and currency tailwinds. PAT stood at INR 1,250 crore (9.4% margin). Deal wins TCV was $603 million, with BFSI growing 4.5% YoY and communications stabilizing sequentially. Management highlighted disciplined large deal strategy, prioritizing margins over volume. Guidance points to continued margin expansion through cost optimization and fresher hiring. Risks include sustained weakness in telecom vertical, competitive pricing pressure, and potential furlough impact in Q3.

Guidance read

FY27 margin target remains unchanged: Management reiterated commitment to significant and predictable margin expansion by FY27, driven by Project Fortius and operational efficiencies. Fresher hiring target of 6,000+ for FY25: Company is on track to hire over 6,000 fresh graduates this fiscal year, with 2,000+ already onboarded in H1. Subcon cost reduction to single-digit percentage of revenue: Management expects to reduce subcontractor costs as a percentage of revenue to single digits over time, supporting margin expansion. Second-half investments slightly heavier than first half: Investments under Project Fortius (1.5% of margins) will be slightly more in H2 vs H1, but not materially different.

Risk read

Key risks include Sustained weakness in telecom vertical — Communications vertical declined 1.7% YoY as clients prioritize cost savings; U.S. telecom remains stressed.; Competitive pricing pressure in large deals — Management noted competitors making 'heroic assumptions' on productivity, potentially leading to aggressive pricing that TechM avoids.; Furlough impact in Q3 — Q3 is seasonally weak due to furloughs; management has limited visibility on magnitude this early.; Auto sector softness — Manufacturing vertical declined 4% QoQ due to softness in auto, especially in Europe and U.S..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 1 missed, 1 delayed.