TCS vs Techm Q3 FY25

TCS reported Q3 FY25 revenue of INR 63,973 crore, up 5.6% YoY, with operating margin expanding 40 bps sequentially to 24.5%. The highlight was a record TCV of $10.2 billion, broad-based across industries and geographies, with BFSI contributing $3.2 billion. Management noted early signs of discretionary spending revival, particularly in BFSI and retail, and a shortening of deal cycles. AI/GenAI deal momentum continues, with agentic AI gaining traction. However, North America revenue declined 2.3% YoY, and headcount fell to 607,354. The BSNL contract is 70% complete and will taper from Q4. Management expects CY25 to be better than CY24, driven by improving demand and strong pipeline. Key risk: macro uncertainty from US trade policies could dampen discretionary recovery.

Guidance read

Margin aspiration of 26% by Q4 FY25: Management aims to exit Q4 at 26% operating margin, within the 26%-28% aspirational band, driven by operating efficiencies and BSNL tapering. BSNL revenue to taper from Q4 FY25 through Q2 FY26: The BSNL contract is 70% complete; revenue will start tapering in Q4 and may extend to Q2 FY26. Management expects to replace most of it via other opportunities. CY25 to be better than CY24 for international business: Management expects stronger growth in CY25 vs CY24, driven by early discretionary recovery and strong deal pipeline, despite BSNL headwinds. Increased campus hiring next year: Preparations underway to onboard a higher number of campus hires next fiscal year, signaling confidence in future demand.

Risk read

Key risks include Macro uncertainty from US trade policies — Potential increase in inflation due to trade tariffs or uncertain government policies could dampen discretionary spending recovery.; BSNL revenue tapering impact — The BSNL contract tapering from Q4 could create a revenue gap; management is confident of replacement but execution risk remains.; North America revenue decline — North America revenue declined 2.3% YoY, and TTH slowed considerably in the US due to market-specific issues and strained client profitability.; Life sciences and healthcare recovery uncertainty — Life sciences healthcare declined 4.3% YoY; recovery depends on policy clarity in the US, which is uncertain..

Promise ledger

Of 3 tracked promises, management 0 met, 0 close, 3 missed.

Tech Mahindra reported Q3 FY25 revenue of ₹13,286 crore (+1.4% YoY reported) and EBIT margin of 10.2% (+60bps QoQ), driven by Project Fortius savings and pricing discipline. PAT stood at ₹983 crore with robust free cash flow of $199 million (172% PAT conversion). New deal wins reached $745 million, up from $603 million last quarter, led by telecom, BFSI, and healthcare. Management reiterated FY27 targets of industry-leading growth and 15% EBIT margin, citing strong pipeline and AI investments. Risks include lumpy deal flow, wage hike headwinds (1-1.5% margin impact in Q4), and persistent weakness in European auto and North American telco discretionary spend.

Guidance read

FY27 EBIT margin target of 15%: Management reiterated commitment to achieving 15% EBIT margin by FY27 through Project Fortius, pricing optimization, and productivity gains. Wage hike impact of 1-1.5% in Q4: Wage hikes effective Q4 FY25 will impact margins by 1-1.5%, but operating levers are expected to partially offset. Industry-leading growth by FY27: Management aims to deliver growth higher than peer average by FY27, supported by large deal pipeline and portfolio rebalancing. Continued investment in GenAI and partnerships: TechM will continue investing in GenAI capabilities, including sovereign LLMs, agentic AI, and partnerships with NVIDIA, AWS, and ServiceNow.

Risk read

Key risks include Lumpy large deal pipeline — Large deal wins are inherently lumpy; a quarter without major closures could slow revenue growth momentum.; Wage hike margin headwind in Q4 — Wage hikes of 1-1.5% will pressure Q4 margins; offsetting levers may not fully compensate.; Persistent weakness in European auto and North American telco — Manufacturing declined 2.5% QoQ due to Pininfarina and European auto pressures; North American telco discretionary spend remains challenged.; Forex losses from cross-currency headwinds — Significant cross-currency headwinds impacted reported revenue; hedging may not fully offset if INR depreciation continues..

Promise ledger

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