TCS Revenue Dips 3% Amidst HCLTech's 5% Q3 Surge
Overview
Tata Consultancy Services reported a 3% revenue decline in Q3, citing seasonal weakness and furloughs. HCLTech, however, emerged as a resilient player, posting a 5% revenue increase. Both firms saw net profits pressured by exceptional and restructuring costs, highlighting ongoing global economic uncertainties impacting IT spending despite strong demand for transformation.
Stocks Mentioned
TCS posted a muted third quarter, with revenue declining 2.6% year-on-year in constant currency terms. This subdued performance was attributed to seasonal weakness and client furloughs. Despite the revenue dip, operating margins remained stable at 25.2%. The company recorded an exceptional charge of Rs 2,128 crore, primarily related to changes in wage definitions under new labor codes.
Q3 Performance Metrics
HCLTech presented a more positive picture, reporting a 4.8% year-on-year revenue increase in constant currency. Management highlighted sustained demand for technology-led transformation, even as cost-takeout deals continue to dominate client priorities. HCLTech absorbed a $109 million one-time cost impact. Net profit declined 14% for TCS to Rs 10,657 crore, while HCLTech saw an 11% drop to Rs 4,076 crore.
Navigating Economic Headwinds
Global uncertainty continues to weigh on IT spending, although demand for technology-led transformation remains strong. Discretionary spending is emerging selectively, even as cost-saving measures are a priority for clients. Geopolitical tensions, trade restrictions, and evolving data and AI regulations add layers of complexity.
Demand Drivers and Deal Wins
TCS CEO Krithivasan noted that while Europe performed well, North America remained sluggish. He highlighted strong sequential growth in AI services, with annualised revenue reaching $1.8 billion, up 17.3% quarter-on-quarter. The company secured $9.3 billion in total contract value (TCV) during the quarter.
Headcount Adjustments
Workforce adjustments were evident in the headcount figures. TCS saw its headcount decline by 11,151 sequentially and 25,191 year-on-year, settling at 5.8 lakh employees. HCLTech, despite adding 2,852 freshers, experienced a net decrease of 261 employees, bringing its total to 2.2 lakh.
