A weak global environment has resulted in subdued revenue growth for IT bellwether Tata Consultancy Services (TCS) in the first quarter ended June 30, 2025, even as stable expenses and delayed wage hikes aided growth in the bottomline.
TCS on Thursday reported a 6 per cent rise in net profit at ₹12,760 crore in Q1FY26 compared with ₹12,040 crore in the corresponding quarter of the previous year.
Revenue grew 1.3 per cent to ₹63,437 crore in Q1FY26 compared with ₹62,613 crore in the corresponding quarter of the previous year amid demand contraction driven by global uncertainties. In dollar terms, revenue during Q1FY26 was $7421 million compared with $7505 million in Q1FY25. On a constant currency basis, the year-on-year decline in revenue was 3.1 per cent.
A breakup of growth in international markets shows a 2.7 per cent decline in revenue in North America, a 1.3 per cent decline in the UK and a 3.1 per cent decline in continental Europe on a constant currency basis. The growth in Indian business at 5.8 per cent in Q1FY26 was lower than 7.5 per cent in Q1FY25, primarily on account of the ramp-down in BSNL projects. Consumer business, life sciences and healthcare, manufacturing, communications and media were among the verticals that saw a year-on-year decline in constant currency growth rate.
While the bottomline came in higher than analyst estimates, the topline on a constant currency basis was weaker than estimates.
The operating margin at 24.5 per cent saw a 30 basis points expansion on a quarter-on-quarter basis, but was lower by 20 basis points on a year-on-year basis.
Samir Seksaria, CFO, TCS, attributed the improvement in margin to a combination of savings on third-party expenses, support from currency and higher other income.
Demand contraction
K. Krithivasan, MD and CEO of TCS, said the continued global macro-economic and geopolitical uncertainties have caused a demand contraction during the quarter.
“On the positive side, all the new services grew well. We saw robust deal closures during the quarter. We remain closely connected to our customers to help them navigate the challenges impacting their business, through cost optimisation, vendor consolidation and AI-led business transformation,” he said.
Krithivasan, however, remains optimistic that international revenue in FY26 will be better than FY25.
“Overall, it would be too early to call out when growth will resume, and it depends on more clarity emerging on the macroeconomic scenario. Things should become clearer towards the end of July and early August,” he said, adding that the company is seeing interest in areas such as application modernisation, ERP transformation, cost optimisation and leveraging AI for business outcomes.
“Across industries, clients are increasingly shifting their focus from use case-based approach to ROI-led scaling in AI,” said Aarthi Subramanian, executive director, president and chief operating officer, TCS.
Hiring growth
The employee strength at the end of the quarter was at 6,13,069 compared with 6,06,998 at the end of Q1FY25, with a net addition of 6,071 year-on-year. The last 12 months attrition rate stood at 13.8 per cent.
Milind Lakkad, chief HR officer, said that the current attrition rate is “above the comfort level” and the company is looking at steps to further bring it down. He said that a decision regarding a wage hike of the employees is yet to be taken.
The board of TCS has approved an interim dividend of ₹11 per equity share.