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Revenue growth lags strong deal wins due to macro delays Alive 2, weakening 2, dead 0.
View Bear Cases →Tata Consultancy Services Ltd — Q2 FY24
TCS reported Q2 FY24 revenue of INR 59,692 crore (+7.9% YoY) and operating margin of 24.3% (+110 bps QoQ), driven by disciplined execution and cost optimization.
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TCS reported Q2 FY24 revenue of INR 59,692 crore (+7.9% YoY) and operating margin of 24.3% (+110 bps QoQ), driven by disciplined execution and cost optimization. Net profit stood at INR 11,342 crore. Deal wins remained strong at $11.2 billion TCV, the third consecutive quarter above $10 billion, including mega deals JLR and BSNL. However, revenue growth was muted due to clients optimizing existing projects and delaying discretionary spending amid macroeconomic uncertainty. BFSI returned to sequential growth, while UK outperformed (+10.7% YoY). Attrition improved to 14.9% (LTM IT). Management maintained the 26%-28% margin guidance but did not provide a timeline. Generative AI engagements crossed 250, and 100,000 associates completed initial AI training. Risk: sustained macro headwinds could delay revenue conversion from the strong order book, keeping growth subdued.
टीसीएस ने दूसरी तिमाही में 59,692 करोड़ रुपये की कमाई की, जो पिछले साल से 7.9% ज्यादा है। कंपनी का मुनाफा 11,342 करोड़ रुपये रहा। कंपनी ने खर्चों पर काबू रखकर 24.3% का मुनाफा मार्जिन हासिल किया। नए ऑर्डर 11.2 अरब डॉलर के मिले, जो लगातार तीसरी तिमाही 10 अरब से ऊपर है। इसमें जेएलआर और बीएसएनएल जैसे बड़े सौदे शामिल हैं। हालांकि, ग्राहकों के खर्च कम करने और नए प्रोजेक्ट टालने से कमाई में ज्यादा बढ़ोतरी नहीं हुई। बैंकिंग-वित्त क्षेत्र में थोड़ी रिकवरी दिखी, और ब्रिटेन में कारोबार 10.7% बढ़ा। कंपनी में नौकरी छोड़ने वालों की दर घटकर 14.9% रह गई। टीसीएस ने 26-28% मार्जिन का अनुमान बरकरार रखा, लेकिन समय नहीं बताया। कंपनी ने 250 से ज्यादा एआई प्रोजेक्ट शुरू किए और 1 लाख कर्मचारियों को एआई की ट्रेनिंग दी। चिंता: अर्थव्यवस्था में अनिश्चितता के कारण मजबूत ऑर्डर के बावजूद कमाई धीमी रह सकती है।
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Macro uncertainty delaying revenue conversion
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Read Transcript →Quarter Snapshot
Deal TCV
$11.2B
+38% YoY
Third consecutive quarter of $10B+ deal wins, including mega deals JLR and BSNL.
Attrition (LTM IT)
14.9%
-2.9pp QoQ
Attrition declined from 17.8% in Q1, reflecting improved retention.
Generative AI Engagements
250+
N/A
Number of active generative AI projects with clients, up from prior quarter.
Customers >$100M
61
+2 YoY
Year-on-year increase in high-value client relationships.
What Changed vs Last Quarter
NEW
Margin guidance maintained at 26%-28%
Management reiterated the long-term operating margin range of 26%-28%, with no specific timeline for achievement.
NEW
Deal win run-rate raised to $9-10B per quarter
COO NGS indicated the new normal for quarterly deal wins is around $9-10 billion, up from the earlier $7-9 billion range.
NEW
BSNL 4G/5G rollout target in 12-18 months
Management expects to complete the BSNL network rollout within 12 to 18 months from Q2 FY24.
NEW
Fresher hiring to continue; all offers honored
TCS will continue campus hiring and honor all offers, though onboarding may be delayed by a quarter.
DROPPED
Aspirational margin band of 26%-28%
Management reiterated the long-term margin aspiration but declined to provide a timeline for achievement, citing macro uncertainty.
DROPPED
Fresher hiring target of 40,000 for FY24
The company plans to hire 40,000 freshers in FY24, though the quarterly spread remains uncertain due to demand softness.
DROPPED
GenAI revenue materialization in 2-3 quarters
Management expects GenAI engagements to start contributing meaningfully to revenue in a couple of quarters.
NEW RISK
Macro uncertainty delaying revenue conversion
Clients are optimizing existing projects and deferring discretionary spending, causing revenue growth to lag behind strong deal wins.
NEW RISK
Large deal margins may be initially dilutive
CFO acknowledged that large deals like JLR and BSNL may have lower margins in early phases, though portfolio-level margins are managed.
NEW RISK
Geopolitical risk from Israel conflict
TCS has 250+ employees in Israel; while business continuity plans are in place, escalation could disrupt operations.
NEW RISK
Headcount decline may signal demand softness
Net headcount fell by over 6,000 QoQ; management attributes it to past hiring, but it could indicate lower demand.
RISK GONE
Prolonged demand softness in North America and BFSI
Revenue growth in key markets remains subdued due to client reprioritization and uncertainty; no clear timeline for recovery.
RISK GONE
Slower conversion of large deals into revenue
Despite strong TCV, revenue growth is flat as projects are delayed or paused; deal conversion in Europe is taking longer than usual.
RISK GONE
Potential pricing pressure in a soft market
While management claims pricing is stable, analysts questioned whether clients are pushing for discounts; management acknowledged no major panic but did not rule out future pressure.
RISK GONE
Onboarding delays and legal complaints
Delays in fresher onboarding have led to complaints (e.g., NITIE to Ministry of Labor), which could impact employer brand and hiring costs.
Fast read
Guidance and risk preview
Management reiterated the long-term operating margin range of 26%-28%, with no specific timeline for achievement.
Clients are optimizing existing projects and deferring discretionary spending, causing revenue growth to lag behind strong deal wins.
View Risks →