TCS net profit up 6% in Q1 FY26, revenue growth muted
The volatile macroeconomic environment has led to a slowdown in revenue growth for TCS, and there is no clarity when the demand would bounce back.
Tata Consultancy Services (TCS) surpassed market expectations with a 6% rise in net profit for the first quarter of FY26, but revenue growth remained flat, setting the tone for another downcast year for the Indian IT industry.
TCS recorded a net profit of Rs 12,760 crore in Q1 FY26 compared to Rs 12,040 crore in the same period a year ago, owing to gains in currency and other income, besides productivity improvements.
Revenue for Q1 stood at Rs 63,437 crore—a 1.3% annual increase. Compared to Q4 FY25, it was a decline of 1.6%.
On the first quarter performance, TCS CEO K Krithivasan said, “The continued global macroeconomic and geopolitical uncertainties caused a demand contraction.” In addition, there has been a ramp-down in the billion-dollar-plus deal with BSNL, which has impacted the overall revenue momentum for the IT company.
According to the CEO, the trends in the previous quarters—where there were delays in spending on new technology projects—have continued, and the company is not sure when the situation is likely to stabilise.
Revenues from its key geographies reveal this situation: The North America market continues to remain flat, while the UK and continental Europe show a decline in revenue numbers, similar to India.
On the future outlook, Krithivasan said, “It is too early to call out when the growth will resume, and this will depend largely on the clarity in the macroeconomic environment.”
TCS' operating profit margin in Q1 FY26 stood at 24.5%—a marginal expansion of 30 basis points. This was largely due to currency gains and certain operational efficiencies. The company reiterated that its long-term profit goal remains in the range of 26-28%.
The other positive for TCS was the increase in its employee headcount, which stood at 6,13,069 at the end of Q1—an increase of 6,071 employees over a year.
On the potential impact of AI and hiring of new employees, TCS Chief HR Officer Milind Lakkad said, “We do not expect any reduction in the quantum of hiring due to AI.”
The overall mood still remains sombre for TCS despite a potential order book of $9.4 billion. The CEO remarked that the bar on return on investment (RoI) has gone up, which has led to new projects being delayed or paused. He further added that this has led to increased focus on cost optimisation projects rather than any transformational deals.
However, the TCS CEO remains confident that FY26 will turn out to be better than FY25.