TCS net profit rises 8.7% for Q1 FY25, meets market expectations

Tata Consultancy Services (TCS) met market expectations as it reported Rs 12,040 crore in net profit for the first quarter (Q1) of FY25, an 8.7% annual rise compared to Rs 11,074 crore a year ago.

TCS' revenue for the first quarter stood at Rs 62,613 crore, an annual growth of 5.4%.

These numbers for India’s largest IT services exporter came in despite no visible signs of a strong business uptick from North America, its largest market, and the added pressure of higher costs due to employee wage hikes.

Speaking on the performance, CEO K Krithivasan said, “It is too early to call whether the growth momentum is sustainable, as the environment is the same, but FY25 will be better than FY24.”

The Indian IT industry continues to struggle with slower spending on technology in the key markets of North America and Europe. In fact, TCS registered a growth rate of below 10% for FY24.

TCS' operating profit margins in Q1 FY25 stood at 24.7% compared to 23.2% in the similar period a year ago. Compared to the sequential quarter, i.e., Q4 of FY24, it was down by 1.3%.

The company said the growth drivers for the first quarter were technology platforms of artificial intelligence (AI), cloud, cyber security, and enterprise solutions.

TCS has witnessed strong adoption of AI among its clients, the CEO said, with 270 ongoing projects, valuing $1.5 billion.

India contributed significantly to the company's growth in Q1 at a 61.8% annual growth. North America accounted for about 50% of its revenue, a slight dip of 1.1% from last year.

TCS' total contract value (TCV) order book in Q1 stood at $8.3 billion, and the company said TCV between $7-9 billion would be a comfortable level.

A big positive for TCS has been the increased hiring of employees after seeing a declining trend for three quarters. The total employee headcount stood at 606,998, an increase of 5,454 compared to Q4 FY24. However, it is still lower than the 615,318 employee headcount a year ago.

The company said it normally hires about 40,000 freshers annually and aims to meet this target in the current financial year.