Tata Consultancy Services Ltd — Q2 FY25
TCS reported Q2 FY25 revenue of INR 64,259 crore, up 7.6% YoY, with constant currency growth of 5.5%.
neutral
medium
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Bear Cases vs Reality
The market's top concerns about TCS, tested against this quarter's numbers.
! Still alive
Deal TCV decline signals weakening demand pipeline
The bear thesis
Deal TCV in Q2 was $8.6B, down from $10.2B in Q2 last year, and H1 TCV is down 20% YoY. This suggests a softening in large deal wins, which could impact future revenue growth.
What the numbers say
Deal TCV Q2 FY25 vs Q2 FY24
$8.6B vs $10.2B, down 15.7% YoY; H1 TCV down 20% YoY
Deal TCV declined YoY and H1 TCV is down 20%, indicating a weaker pipeline. Although management cites a strong pipeline near all-time highs, the actual TCV numbers confirm the bear case.
Source: From analyst Q&A
! Still alive
Margin pressure from growth market investments and BSNL tapering
The bear thesis
Growth markets have lower margins, and scaling them may pressure overall margins. Additionally, BSNL deal revenue is at peak and expected to taper after Q3, potentially creating a revenue gap.
What the numbers say
Operating margin Q2 FY25 vs Q1 FY25
24.1% vs 24.7%, down 60 bps sequentially
Operating margin declined 60 bps sequentially to 24.1%, missing the aspirational 26% exit target. This confirms margin pressure from investments and BSNL tapering, keeping the bear case alive.
Source: From analyst Q&A