Tata Consultancy Services (TCS), India's largest IT services company, has reported a mixed performance in its first quarter results, with profit exceeding expectations despite a slight dip in revenue and challenges from the BSNL deal ramp-down. However, analysts have reduced their price targets following the soft Q1 performance.

Profit Surpasses Expectations

TCS announced a consolidated net profit of ₹12,760.00 crore for Q1, marking a 4.40% increase from the previous quarter. This figure surpassed estimates, showcasing the company's resilience in a challenging market environment. The profit boost was partly attributed to a one-time tax refund interest.

Revenue Performance and Analyst Reactions

Q1 revenue experienced a slight decrease of 0.60% sequentially to $7,421.00 million. This figure fell short of expectations, reflecting the ongoing global economic uncertainties affecting the IT sector and the impact of the BSNL deal ramp-down. Notably, TCS reported a 3.3% sequential drop in constant currency revenue.

In response to the soft Q1 performance, analysts from Nomura and UBS have reduced their price targets for TCS. The company's decision to delay salary hikes due to market uncertainties has also contributed to the cautious outlook.

Key Financial Metrics

The company's financial results revealed several noteworthy aspects:

• Operating Margin: TCS maintained a healthy operating margin of 24.50%, showing an expansion of 30 basis points quarter-on-quarter.
• Net Margin: The net margin stood at 20.10%, up 90 basis points year-on-year.
• Earnings Per Share: Basic and diluted earnings per share were reported at ₹35.27.

Segment Performance

TCS's performance across various business segments showed mixed results:

Dividend Declaration

The Board of Directors has declared an interim dividend of ₹11.00 per equity share. The record date for this dividend is set for July 16, with the payment scheduled for August 4.

Workforce and Attrition

As of June 30, TCS's workforce stood at 613,069, with a net addition of 6,071 employees year-on-year. The company reported a Last Twelve Months (LTM) IT services attrition rate of 13.80%, indicating improved retention rates.

Deal Wins and Future Outlook

Despite the challenges, TCS reported an increase in deal wins to $9.40 billion. While the management maintains an optimistic growth outlook for FY26, analysts remain cautious about growth visibility. The company remains focused on leveraging new technologies and maintaining its strong market position.

Management Commentary

K Krithivasan, CEO and Managing Director of TCS, commented on the results: "The continued global macro-economic and geo-political uncertainties caused a demand contraction. On the positive side, all the new services grew well. We saw robust deal closures during this quarter."

TCS's Q1 results demonstrate its ability to maintain profitability amidst revenue pressures and specific challenges like the BSNL deal ramp-down. The company's emphasis on AI-led business transformation and cost optimization strategies for clients indicates its readiness to navigate the evolving IT landscape. However, the reduced price targets from analysts suggest a more cautious outlook for the company's near-term performance in a dynamic global market.

Tata Consultancy Services (TCS), India's largest IT services company, has reported its financial results for the first quarter of the fiscal year 2026, revealing a slight dip in revenue but maintaining strong profitability.

Revenue and Profit

TCS reported a consolidated revenue of ₹63,437.00 crore for Q1 FY26, marking a 3.1% year-over-year decline in constant currency terms. Despite the revenue contraction, the company managed to improve its profitability. Net income stood at ₹12,760.00 crore, representing a 6.0% increase compared to the same period last year. The net margin improved by 90 basis points year-over-year to reach 20.1%.

Operational Performance

The company's operating margin for the quarter was 24.5%, showing an expansion of 30 basis points quarter-on-quarter. This improvement in margins despite the revenue decline highlights TCS's focus on operational efficiency.

Dividend Declaration

The Board of Directors has declared an interim dividend of ₹11.00 per equity share. The record date for the dividend is set as July 16, 2025, with the payment scheduled for August 4, 2025.

Order Book and Business Outlook

TCS reported a robust order book with total contract value (TCV) of $9.40 billion for Q1. The company cited global macro-economic and geo-political uncertainties as factors causing demand contraction. However, it noted positive growth in new services and strong deal closures during the quarter.

Workforce and Attrition

As of June 30, 2025, TCS's workforce stood at 613,069, with a net addition of 6,071 employees year-over-year. The company reported a last twelve months (LTM) IT services attrition rate of 13.8%, indicating improved employee retention.

Segment Performance

The Banking, Financial Services and Insurance (BFSI) segment remained the largest contributor to TCS's revenue, accounting for 32.0% of the total. However, most industry verticals experienced negative growth, with Life Sciences & Healthcare and Communication & Media segments both declining by 9.6% year-over-year in constant currency terms.

Management Commentary

K Krithivasan, CEO and Managing Director of TCS, commented on the results: "The continued global macro-economic and geo-political uncertainties caused a demand contraction. On the positive side, all the new services grew well. We saw robust deal closures during this quarter."

Future Focus

TCS highlighted its investments in artificial intelligence (AI) capabilities, with 114,000 employees now possessing higher-order AI skills. The company is focusing on scaling AI across enterprises and transforming various aspects of its services, including contact centers, cost optimization, and cyber defense capabilities.

In conclusion, while TCS faced revenue headwinds in Q1 FY26, the company demonstrated resilience through improved profitability, strong order bookings, and strategic investments in emerging technologies like AI. The declaration of an interim dividend also signals confidence in the company's financial position despite the challenging global environment.