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North America revenue decline signals prolonged weakness Alive 4, weakening 0, dead 0.
View Bear Cases →Tata Consultancy Services Ltd — 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.
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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.
TCS ने पहली तिमाही (अप्रैल-जून 2024) में 62,613 करोड़ रुपये की कमाई की, जो पिछले साल से 5.4% ज्यादा है। कंपनी ने कर्मचारियों की सालाना तनख्वाह बढ़ोतरी के बाद भी 24.7% का मुनाफा कमाया। शुद्ध लाभ 12,038 करोड़ रुपये रहा। भारत में कारोबार 61.8% और मैन्युफैक्चरिंग में 9.4% बढ़ा, लेकिन उत्तरी अमेरिका में 1.1% गिरावट आई और बैंकिंग-वित्त क्षेत्र कमजोर रहा। कंपनी को 8.3 अरब डॉलर के नए ऑर्डर मिले, जिसमें AI से जुड़े काम दोगुने होकर 1.5 अरब डॉलर पहुंच गए। प्रबंधन का कहना है कि यह साल पिछले से बेहतर रहेगा, लेकिन ग्राहकों की अनिश्चितता के कारण लगातार बढ़त का दावा नहीं कर सकते। मुख्य जोखिम: अमेरिका और बैंकिंग क्षेत्र में फैसलों में देरी, और कंपनियों का अपना काम खुद करने का रुझान।
Bear Cases4 alive · 0 deadPromises0 met · 1 missedRisks3 trackedTranscriptfull text
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Promises
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0 delivered, 0 close, 1 missed.
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Risks
3 risks
Risk Intelligence
Sustained weakness in North America and BFSI
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Transcript
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Read Transcript →Quarter Snapshot
Order Book (TCV)
$8.3B
-33% QoQ
Total contract value for Q1 FY25, down from $12.4B in Q4 FY24, but within the $7-9B comfort range.
AI/GenAI Pipeline
$1.5B
+67% QoQ
Doubled from $900M in Q4 FY24, reflecting strong traction in AI engagements.
Net Employee Addition
5,452
+5,452 QoQ
Headcount increased to 606,998, with 11,000 trainees onboarded in the quarter.
Attrition Rate (LTM)
12.1%
-40bps QoQ
Attrition moderated from 12.5% in Q4 FY24, expected to stabilize around this level.
What Changed vs Last Quarter
NEW
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.
NEW
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.
UPDATED
FY25 better than FY24
Management reiterated that FY25 will be better than FY24 in terms of revenue growth, but declined to provide specific numbers.
DROPPED
Operating margin trajectory similar to FY24
CFO indicated Q1 will see headwinds from wage hikes, with margins clawing back through the year, similar to FY24 pattern.
DROPPED
Pricing improvements to drive incremental margins
CFO noted that incremental margins will need to come from pricing improvements, including renewals and new deals at higher prices.
NEW RISK
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.
NEW RISK
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.
NEW RISK
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.
RISK GONE
Client discretionary spend volatility
Management highlighted that clients continue to pause or defer discretionary projects with unclear ROI, creating headwinds to near-term revenue.
RISK GONE
Margin headwinds from wage hikes in Q1
Annual wage increments effective April 1 will pressure margins in Q1 FY25, though management expects recovery through the year.
RISK GONE
Unpredictable client decision-making on deal ramp-downs
NGS noted that clients sometimes defer or slow down signed deals, creating volatility that is hard to predict, as seen in BFSI.
RISK GONE
Subcontractor cost lever may have bottomed out
CFO indicated that the subcontractor cost optimization that helped margins in FY24 may have limited further scope, reducing a key margin lever.
🤫 Topics management stopped discussing
Mentioned in Q2 FY24, Q3 FY24
Headcount declined by 5,600 in Q3. CHRO said further decline would not be surprising, which could signal lower utilization or demand.
Fast read
Guidance and risk preview
Management reiterated that FY25 will be better than FY24 in terms of revenue growth, but declined to provide specific numbers.
North America revenue declined 1.1% YoY and BFSI remained negative YoY, with management citing ongoing client uncertainty and delayed decision-making.
View Risks →