Earnings call transcript: TCS sees stock rise amid strong Q1 2025 results

Tata Consultancy Services Ltd. (TCS) reported its Q1 FY 2025 earnings, showcasing a modest revenue growth of 1.3% year-over-year. Despite a slight decline in US dollar revenue, the company impressed with a significant total contract value increase of 13.2%, reaching $9.4 billion. Following the earnings announcement, TCS stock rose by 2.73%, reflecting investor confidence in the company’s strategic direction and future prospects. According to InvestingPro data, three analysts have recently revised their earnings estimates upward for the upcoming period, suggesting growing optimism about the company’s near-term performance.

Key Takeaways

• TCS reported a total contract value (TCV) of $9.4 billion, a 13.2% increase year-over-year.
• Operating margin improved sequentially by 30 basis points to 24.5%.
• Net margin stood at 20.1%, indicating strong profitability.
• The company added over 5,000 employees, bringing the total workforce to 613,069.
• TCS’s stock price increased by 2.73% after the earnings release.

Company Performance

TCS’s overall performance for Q1 FY 2025 highlighted resilience amidst global economic uncertainties. While revenue in US dollars saw a minor decline of 1.1% year-over-year, the company achieved a 6% growth in earnings per share. The robust increase in TCV and an improvement in operating margins underscore TCS’s strong market position and ability to secure significant deals despite challenging conditions.

Financial Highlights

• Revenue: ₹63,004.37 crores (1.3% YoY growth)
• US Dollar Revenue: $421.007 million (-1.1% YoY)
• Operating Margin: 24.5% (30 basis points improvement)
• Net Margin: 20.1%
• Total Contract Value (TCV): $9.4 billion (13.2% YoY growth)
• EPS Growth: 6% YoY

Outlook & Guidance

Looking ahead, TCS remains optimistic about its international market performance for FY 2026. The company anticipates improved results in Q2 compared to Q1, with a focus on enhancing utilization and productivity. The strategic emphasis on AI and emerging technologies is expected to drive future growth, alongside anticipated revenue increases in international markets. The company’s strong financial position is evidenced by its 22-year track record of consistent dividend payments and robust revenue growth of 32.41% over the last twelve months, as reported by InvestingPro.

Executive Commentary

• "We are seeing enterprises move beyond small-scale, use case-centric pilots to disciplined, production-grade rollouts that tie GenAI directly to business outcomes." - Aarti Subramanian, COO
• "Global businesses were disrupted due to conflicts, economic uncertainty, and supply chain issues." - Krithi Vasan, CEO
• "TCS aims to be a partner that helps our clients withstand short-term disruptions while executing their transformation strategy." - Krithi Vasan, CEO

Risks and Challenges

• Global economic uncertainties and geopolitical tensions could impact future growth.
• Discretionary spending by clients remains under scrutiny, potentially affecting revenue.
• Increasing attrition rates in IT services, currently at 13.8%, may pose operational challenges.
• The need for cost optimization and vendor consolidation could pressure margins.
• Rapid technological changes necessitate continuous investment in innovation.

TCS’s robust Q1 performance and strategic focus on AI and emerging technologies position it well for future growth, despite prevailing global challenges.

Full transcript - Tata Consultancy Services Ltd. (TCS) Q1 2026:

Conference Operator: Ladies and gentlemen, good day and welcome to the TCS Earnings Conference Call. As a reminder, all participant lines will be in a listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Ms. Nehal Shah from the Investor Relations team at TCS.

Thank you, and over to you.

Nehal Shah, Investor Relations, TCS: Thank you, operator. Good evening, and welcome, everyone. Thank you for joining us today to discuss TCS’ financial results for the first quarter of fiscal year FY 2026 that ended on 06/30/2025. This call is being webcast through our website and an archive including the transcript will be available on the site for the duration of this quarter. The financial statements, quarterly fact sheet and press releases are also available on our website.

Our leadership team is present on this call to discuss our results. We have with us today Mr. Kekriti Vasan, Chief Executive Officer and Managing Director.

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Hello, everyone.

Nehal Shah, Investor Relations, TCS: Ms. Aarti Subramanian, Executive Director, President and Chief Operating Officer.

Aarti Subramanian, Executive Director, President and Chief Operating Officer, TCS: Good evening, everyone.

Nehal Shah, Investor Relations, TCS: Mr. Samir Saxirian, Chief Financial Officer.

Samir Saxirian, Chief Financial Officer, TCS: Hello, everyone.

Nehal Shah, Investor Relations, TCS: And Mr. Milin Lakkar, Chief Human Resources Officer.

Milin Lakkar, Chief Human Resources Officer, TCS: Hi, everyone.

Nehal Shah, Investor Relations, TCS: Our management team will give a brief overview of the company’s performance, followed by a Q and A session. As you are aware, we don’t provide specific revenue or earnings guidance. And anything said on this call, which reflects our outlook for the future or which could be construed as a forward looking statement, must be reviewed in conjunction with the risks that the company faces. We have outlined these risks in the second slide of the quarterly fact sheet available on our website and e mailed out to those who have subscribed to our mailing list. With that, I would like to turn the call over to Krithi.

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Thank you, Nihar. Again, good day, everyone. During our April 2025 earnings call, we had call with delays in decision making and projects start with respect to discretionary investments. This trend has continued and intensified to some extent in this quarter. Global businesses were disrupted due to conflicts, economic uncertainty, and supply chain issues.

We saw cost pressures in our customers customers causing previously unseen project process, deferrals and decision delays that resulted in less than expected revenue conversion. In this backdrop, our quarterly revenue declined by 3.1% year on year in constant currency terms. Our operating margin was 24.5%, and the net margin was 20.1%. Our total value of contracts signed in q one FY ’25 FY twenty six was 9,400,000,000.0, up 13.2% year on year. These headline numbers must also be read in the context of successful completion of a very large strategic program of national importance last quarter.

Looking ahead, enterprises realize the need to invest in being perpetually adaptive and require a dependable partner that can provide them with not only the right capabilities, but also the scale and maturity to manage a dynamic environment. TCA aims to be that partner that helps our clients withstand short term disruptions even while executing their transformation strategy for long term value creation. In this context, we are very confident on the robustness of the demand as well as the strength of our business model from a medium to long term perspective. I would also like to inform you that this will be Milan’s last earnings call. He has set a stellar and distinguished record of Selvich for thirty eight years in this industry.

Joining PCS as a trainee in 1987, he rose to lead the manufacturing business group and subsequently the CHRO. On behalf of TCS, I would like to thank him for all his contributions. I’ll now invite Sameer and Milan to go over different aspects of our performance during the quarter. I’ll step in later to provide more color on the demand trends we are seeing. Aarti will further share an update on our service center.

Over to you, Amit. Amit?

Samir Saxirian, Chief Financial Officer, TCS: Thank you, Priti. Good day, everyone. In the first quarter of twenty six, our revenue was rupees $63,004.37 crores, which is a year on year growth of 1.3%. In dollar terms, the revenue was US7421 million dollars $421,007,000 and a year on year decline of 1.1 In constant currency terms, our revenue declined 3.1%, again on a Y o Y basis. Our Q1 operating margin stood at 24.5%, reflecting a sequential improvement of 30 basis points.

We built up capacity and continued our investments during the quarter with a long term focus. The demand contraction during the quarter had an impact on our utilization and was offset by lower third party costs and currency. Higher other income and lower effective tax rate for the quarter helped boost our net income margin to 20.1%. Our EPS grew 6% Y o Y. Our accounts receivable were at seventy five days DSO in dollar term, up five days y o y.

Net cash from operations was dollar 1,500,000,000.0, which is a cash conversion of 100.3% of net income. Free cash flows were at 1,300,000,000.0, and invested funds at the end of the period stood at dollar 5,700,000,000.0. The board has recommended an interim dividend of rupees 11 per share. With that, I’ll hand over now to Mr. Melin.

Thank you, Sameer.

Milin Lakkar, Chief Human Resources Officer, TCS: Our workforce at the end of the first quarter was 613,069. Net relation during the quarter was over 5,000 employees. We have honored all the job offers and will do so for the rest of the year. Metal hiring will be recalibrated based on the demand outlook. We continue to invest significantly in our business to stay relevant to our customers, changing technology needs.

In this quarter, our associates invested 15,000,000 of million hours in building expertise in emerging technologies, enabling them to lead the transformation journey of our customers. It is gratifying to note that TCS now has 114,000 people with higher order AI skills. Our LTM attrition in IT services for the 13.8% at the end of Q1, up 50 basis points sequentially. I will now request Krithi to speak on the various demand drivers during the quarter.

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Thank you, Virid. During the quarter, enterprises remained focused on cost optimization, vendor consolidation, and efficiency led technology transformation. Discretionary spend continues to remain under heightened scrutiny and pressure. However, enterprises focus on scaling AI adoption across applications, workflows, and data platforms remain strong. Our approach at TCS integrates expertise in deploying technology blended with contextual knowledge of enterprise, data, business processing, industry strength, and change management.

You will see our capabilities in action through real world examples spanning industries and service areas, which we’ll go through with the help of a few customer case studies. First, in BFSS, in America, BFSS clients are cautious with tech investments as they assess the current economic uncertainty. Growth is being driven by rapid advancements in general, broad platform modernization, and automation. Clients are focusing on regulatory readiness, data governance, and cost efficiency through technology rationalization. There is growing demand for integrated digital solutions that enhance customer experience, ensure compliance, and enable scalable operations across banking capital markets into insurance, wealth, and payment segments.

Banks are actively pursuing legacy and mainstream modernization to streamline operations and improve system resilience. Discretionary spend is under pressure. The softness that we had called out earlier in US insurance continued throughout the quarter. However, we are seeing insurance doing well in Europe. VFS continues to remain cautious in Europe and Europe.

We believe the current caution in VFS is temporary as there’s a lot of unmet demand. Moving on to the consumer business too. This was one of the most affected sectors in this quarter. Widespread industry challenges resulted in funding delays, project postponements, and delayed milestone completion. However, we continue to work on transformative programs across all industry segments.

The leading US specialty retailer partnered with PCS to overall its product information ecosystem that is critical for driving sales, forecasting, and data driven merchandising. This is an initiative of strategic importance that had previously faced significant implementation challenges, including fragmented data ownership and complex system landscape. Leveraging deep domain and contextual knowledge, TCS designed and implemented an end to end solution with a robust SaaS based product information management platform that’s integrated with multiple legacy systems. TCS established scalable data flows that ensure data quality and governance, enable advanced analytics, and import vendor led asset management. The transformation delivered a three x increase in its SKU creation and maintain speed, unlock significant annual savings by eliminating manual attribution and enrichment efforts, improving time to market operational efficiency, and enhanced customer management.

In the manufacturing sector, although the automotive sector faced significant challenges and reduced spending, the manufacturing vertical as a whole showed minor growth. Amidst the uncertain environment, clients are aiming to lower their overall technology debt and are investing in initiatives intended to prepare the technology infrastructure for future demands. TCS and Jaguar Land Rover are a long standing strategic partnership encompassing various aspects of technology, innovation, and sustainability. This collaboration is evident in areas like software defined vehicle, customer experience, and the Jaguar Land and Jaguar Thesis Racing Formula E team. At the Formula E world championship, top performance depends on time critical data analytics.

Whether at the racetrack or in the team base, Jaguar team racing team racing engineers need timely access to this data to make informed decisions about car setup and race strategy. Undoubtedly, this is where champions are won championships are won or lost. While Formula E races often take place on temporary streets and streets under state regulations, Jaguar TCL racing can’t often practice on physical circuits or running or run-in person test. Regardless, teams must still find ways to develop top performing cars. We set out to help solve this challenge by enhancing the team’s digital twin technology so that it can run more simulations, generate more data, and validate software.

TCS automotive data science team developed the virtual vehicle validation model, which instructs the digital twin of Jaguar I Type seven on how to navigate the track bay track based on various inputs. This model runs continuous simulation, saving engineers critical time during race preparation and enabling them to make last minute changes to the vehicle software in pursuit of performance gains. Having confidence that the simulator results are accurate enables them enable the team to unlock creativity and innovate innovation in itself. Moving on to life sciences and health care. Life sciences customers are exercising caution.

They are focusing on essential business activity with some growth initiatives postponed or their schedules put under review. The pharmaceutical sector is grappling with pricing, supply chain issues, export risk. Companies are prioritizing r and d, profit margin, and operational efficiency. Leading firms in The US, UK, Europe, and Japan are consolidating vendors and business services while leveraging AI. The recent passage of the big beautiful bill in US includes nearly trillion dollar in Medicaid find Medicaid finding deduction over ten years, rollbacks to Affordable Care Act, and 500,000,000,000 in Medicare spending deductions amongst host of other changes.

These changes are expected to severely impact the earnings of Medicaid focused insurers, hospital operators, diversified Medicare insurers amongst us. In health care, payers are trying to optimize cost due to rising medical expenses. Preauthorization delay and claim denials are causing friction with providers. Key priorities are affordability, transparency, simplification, and improved patient experience. Clients are modernizing core systems, exploring data marketplaces, cyber resilience, and AI in SDLC, though budget constraints hinder approval.

The medtech industry is witnessing regulatory scrutiny, demand changes, cost pressures, regional consolidation, new business models, and higher customer expectations. This has put pressure on supply chain to cut costs. Moving on to energy, resources, and utilities, this vertical phase reduced spending and capital investment due to policy changes and geopolitical tension. However, we are working on many transformative engagements, like rebalancing of supply chain, grid optimization, etcetera. For Fortune 500 utility in The US, we are consolidating and transforming their advanced manufacturing infrastructure solution across their operating companies.

This major business transformation includes advanced features such as load profiling, forecasting, settlement, and real time energy consumption management. The system also helps in proactive outage management and provide capabilities for remote operations. The solution will not only transform the customer experience across multiple states in their service territory, but will also set up a strong foundation for network analytics and renewable intelligence. The tech and technology and services industry sustained growth across all markets this quarter. In this quarter, AIA has established itself as a fundamental driver of product innovation across all subsegments under tech.

Enterprises continue to defer business transformation initiatives and priorities targeted technology transformation that deliver significant operational efficiencies and cost savings. In the communication, media, and informations vertical vertical, interfaces are reevaluating their priorities with a strong emphasis on AI and automation, diversification, cost optimization, and vendor consolidation. With subscriber growth plateauing and competition intensifying, AIA driven innovation helps CMI companies rethink business model and diversify revenue streams. With AIA, the CMI industry is aiming to transform every stage of the workflow, including enabling strategic decision making, content generation, and audience personalization. Foxtel Group, Australia’s leading streaming subscription television company, partnered with TCS to transform their customer service operations by increasing the consistency and speed of responses to customer queries and addressing the challenge of increasing cost of services.

TCS deployed advanced generic capabilities, powered by leading AI platform model to drive measurable business impact. The transformation began with a comprehensive verification of the knowledge based architecture, ensuring information was easily accessible and uploaded. Implementing the AI powered solution was a game changer, enabling the automation of conversation summaries and enhancing data security measures. This holistic approach ensure that customer interactions are not only efficient, but also secure. PCs played a pivotal role in this transformation, bringing domain and technical expertise, contextual knowledge, and proprietary assets.

By integrating advanced AI capability, Forrester achieved faster response times and higher first call resolution rates, significantly improving the customer experience. Agent productivity saw a notable increase, and customer engagements improved, while the total cost of ownership for Foxtel came down. During the quarter, TCS and Foxtel Group also won the AE Pacesetter category the twenty twenty five ASG Paragon Awards, award the a n z ANZ in recognition of this impact. Moving on to our portfolio of products and platforms. They continue to help us in developing bespoke solutions for our clients.

Igneo, our cognitive automation software suite, saw multiple new deal wins. Evolve evolving technological trends in AI, agent decay, and Gena are leading to increased investments in AI based systems and intelligent automation. These developments are accelerating igneous prominence as more customers implement implement autonomous enterprise solutions. We continue to build on our leadership position in The UK life and pension market with key programs going live on our BFSA platform. Now Pensions Limited, one of the major workplace pension providers in The UK, offering auto enrollment for its employers and members, went live on PCS banks.

They’re also leveraging our intelligent experience solutions for all digital and mobile. The program consolidates multiple legacy systems on PCS Bank, leveraging secure real time seamless integration with PensionLab, a leading pension aggregator in The UK market, to drive business growth. We have migrated over 100,000 employees and more than 3,300,000 policies to our branch. Lloyd’s banking group has gone live with Caesars Bank for wealth administration solutions. This is a refreshed offering we have created and is a major milestone for the transfer agency industry with innovation being introduced where legacy systems are the norm today.

With strict UK cash regulations, the solution has been designed to have high SPP of all banking, reconciliation, and controls, reducing the risk of any breach to the regulator. The design allows the operation staff to handle customer issues with one click, improving satisfaction for both customers and staff. Customers receive one consolidated communication and can make a single payment for multiple deals or funds, streamlining the investment process. We expect these goal is to further expand our position in UK. PCS IR, our platform for digital assessment, exam administration, has continued impressive performance.

We have partnered with prestigious institutes of national importance, such as IIT and This quarter, we released the latest version of PCS MasterCard augmented with Gen AI and agentic AI. This solution automate the process of modernizing legacy applications that will significantly reducing the cost and time required for manual conversions. The generic agent decay enhancements will allow organizations to mine business logic faster and more accurately. The automation driven with the latest version of PCS MasterCard can save up to 70% in cost and achieve results up to twice as fast as traditional interventions. All the customer case studies we spoke of illustrate the impactful projects we undertake in collaboration with our clients and technology partners.

Our solutions are driven by continuous upskilling of our talent, investments in r and d, contextual knowledge of enterprises, and investments in creating products and platforms such as IgMiu, TCS Bank, TCS ATG, and TCS Cognizant, all of them supported by strong partnerships within our technology ecosystem. Let me conclude by saying that we had a robust deal closure this quarter, and our total value of contracts signed in q one of FY twenty six is 9,400,000,000.0. North America TCV was 4,400,000,000.0. BFSI TCV was 2,500,000,000.0, and Consumer Business Group contributed to 1,600,000,000.0. Our deal pipeline continues to be very healthy and well distributed across verticals and geographies, and that gives us the confidence on our customer centric strategy.

With our team leading all the service lines, we are broadening our leadership in emerging technologies and aim to bring even more seamless integration across our service offerings. With that, let me hand over to Arthi for giving more color on our service offerings.

Aarti Subramanian, Executive Director, President and Chief Operating Officer, TCS: Thank you, Priti. This is my first quarterly earnings call after I took on the road, and it’s a pleasure to be here with all of you today. I would like to provide some updates on our service line offering and the impact they have created for our customers during the quarter. I would like to first begin with AI and data. We are seeing enterprises move beyond small scale, use case centric pilots to discipline production grade rollouts that tie GenAI directly to business outcome.

Customer spend is clustering around three big themes, AI led business transformation, AI led AI enabled SDLC IT operations, and data platform modernization that sets the foundation for agentic AI. When the consolidation plays and sovereign AI cloud deployment are starting to point to a mature to a maturing AI and data market that now demands security guardrails and observability by default. ECS is leaning into this opportunity with new offerings in agentic AI and AI infusion in our services. Our investment in TCS WisdomNext, our leading AI platform, is expanding with the addition of agentic AI capability. We continue to scale our workforce on AI and deepen AI and data partnership across both hyperscalers and native AI and data companies.

I would like to share a couple of examples. Answer, the New York based multinational property and casualty insurance company, chose TCS to develop a solution using large language model to extract risk information, generate codes against the competition, and create a personalized summary. This new solution replaced the previous method for doing the same, which had brokers rekeying a lot of data manually and also reduced the time for code extraction and generation from thirty minutes to five minutes. Brokers also benefit from comparison, recommendation, and personalized summary as it reduces the need for manual analysis and comparison to understand the customer quotation. This innovative solution received the Celent model insurer 2025 award in the Customer Experience Transformation Academy.

TCS is collaborating with Owens Corning to co develop GenAI powered solutions that enhance knowledge search and enable intelligent automation. These efforts are aimed at empowering employees with faster access to relevant relevant information, streamlining routine tasks, and improving decision making. By reducing manual effort and supporting greater efficiency, the partnership is helping build a foundation for a more agile, responsive operation without disrupting existing business processes. Moving on, I would like to share a couple of highlights of marquee engagement on the leading hyperscalers public cloud platform. CCS helped a leading electronics retailer in The US to relaunch the midnight store opening model and successfully completed a gaming product launch within a very short window.

TCS leveraged its peak season framework to plan, forecast and demand and implement cloud based real time monitoring of the traction traffic and ensure stability of the store operation. The DCS solution helped open more than thousand stores across The Americas at midnight to drive additional sales of more than 100,000 units within two hours, resulting in substantial incremental revenue for the retailer. Enterprise solutions continues to be an area of focus for our customers. Clients are increasingly investing in stabilizing their business workflow and modernizing their digital code by adopting AI powered SaaS platform. I would like to share a few examples.

An American multinational energy conglomerate chose TCS to help embark on a commercial transformation journey to establish new business model. This included modernizing their existing commercial platforms to introduce subscription based models as well as deliver enhanced customer experience and reduce technical debt. TCS designed and modernized their current commercial platform with the implementation of a robust subscription management system, leveraging leading SaaS based CRM and CPQ platforms. Expected business outcomes include a 70% reduction in cycle time in the lead to cash cycle and a 20% increase in customer satisfaction. A large European pharmaceutical and agrochemical company partnered with PCS to redesign and harmonize their end to end processes and create a resilient backbone across their businesses, leveraging a leading ERP platform.

As part of a transformation across all the client businesses with a view to create a single source of truth for their downstream analytics in order to achieve increased productivity, improve time to market, and reduce inventory. This is a multi country, multiyear program of which the pilot country go live went very successfully this quarter. All of us know organizations are prioritizing cybersecurity to protect sensitive customer data, ensure trust, and safeguard brand reputation. This quarter, the focus of our customers has been on identity and access management, management detect managed detection and response, and governance, risk, and compliance services. We are also seeing increased traction for enterprise attack service management, cloud security, data security, and network security.

For a leading transport organization in Europe, we recommended information security and IT governance practices for AI assets against various industry standards, including the EU AI Act regulatory requirement, thereby enabling the customer’s organization to establish revised security governance and control. We also provided strategic recommendations for a leading global biopharmaceutical major aimed at maturing identity and access management practices towards industry leading standards, enhancing the robustness and efficiency of I’m controls. By adopting AI powered threat detection, secure transaction frameworks, and a robust compliance solution framework, businesses are strengthening their defenses against evolving threats while maintaining operational integrity and customer confidence. The last service line I would like to talk about is the TCS Intractors. During q one, businesses focused on operational excellence and innovation, harnessing data and AI for better performance.

TCS Interactive enhanced customer experience and marketing through creative engineering powered by AI. In Q1, we successfully executed a precision marketing campaign for the aftersales division of a global automotive OEM. Leveraging our AI powered TwinX digital twin platform, We simulated over 100,000 campaign variants, systematically filtering out low performing strategies and replacing conventional spray and pray emails with data driven personalized targeting. To rigorously validate the platform recommendations, we reduced the randomized controlled trial. We conducted a randomized controlled trial comparing outcomes between TwinX driven customer groups and traditional approaches.

Within just one month, the pilot delivered a statistically verified five x increase in dealer visits and two x increase in service and parts revenue. Building upon these robust outcomes, we are now collaborating with the clients to embed TwinX into subsequent service campaign cycles. With that, I would like to open the line for further questions.

Conference Operator: Thank you very much. We will now begin the question and answer session. We’ll take our first question from the line of Sudhir Guntupalli from Kotak Mahindra AMC. Please go ahead.

Sudhir Guntupalli, Analyst, Kotak Mahindra AMC: Hi, team. Thanks for the opportunity. Kriti, just a couple of questions. So apart from the BSN and D, is there any other client specific situation you might be going through in any vertical

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: In which geography, sir?

Sudhir Guntupalli, Analyst, Kotak Mahindra AMC: No. In in general, in any particular geography. Apart from the BSNL deal, are you seeing any other client specific situation?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: There is no specific client specific situation today.

Sudhir Guntupalli, Analyst, Kotak Mahindra AMC: Okay, sir. And just some clarification on your comment in the press release. Are are you still reiterating that FY twenty six will be better than f I twenty five at the overall company level or more so you’re talking about the core markets?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: For the Sudhir, at this time, we are confident the international market will do better in f eight twenty six than f eight twenty five. However, it is our aspiration to continue to drive growth in other overall growth as well. But, you know, like, we did a high bar to cost, but we work towards that.

Sudhir Guntupalli, Analyst, Kotak Mahindra AMC: Understood, sir. And last question from my end. So you mentioned that by July, probably, we’ll see some clarity and pent up demand. So from the time that US started announcing the trade deals with major trading partners like China, UK, etcetera, are you seeing that the peak of the uncertainty is already behind and some amount of improvement in the client decision making process?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: We are not currently seeing them so far, Sudhir. Because, yes, you know, like, even with China, they they have they have a framework deal. Like, their actual deal and tariffs are not in the notes. And my guess is that till most of the trade deals are announced, there will be this lack of clarity.

Gaurav Rateria, Analyst, Morgan Stanley: Got it. Thank you so much.

Conference Operator: Thank you. We’ll take our next question from the line of Kumar Rakesh from BNP Paribas. Please go ahead.

Kumar Rakesh, Analyst, BNP Paribas: Hi, good evening and thank you for taking my question. And welcome, Arty, to the TCS team. My best wishes. My first question was, it appears like decision making, which you spoke about deteriorated towards the end of the quarter. So what are the risks to the September?

What I’m trying to understand is all the project delays and deposits which happened during the quarter, is it fully reflected in the number which we have reported? Or there’s more to come into the September as well?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: See, like, if there are no further because whatever you have, the delays that we had, I’ve been to a great extent, factor into our Q1 number. Could there be some small residual effect in Q2 as well? And if there are no further delays, q two should be at least better than q one. But we need to wait and watch, like, based on what happens in the market.

Kumar Rakesh, Analyst, BNP Paribas: Thanks for that. My second question was on margin. So before we entered with the BSNL deal, our margin was trending about 25%, 26% at EBIT level. And understandably, after that, the margin came down. And now we have exited from the BSNL deal, but our margin is below the level where it was prior to BSNL deal.

Now between this period, you have lowered your SG and expenses. I would imagine that your employee pyramid also would have improved. You have spoken about that how productivity has improved over the last one year and pricing also seems to be stable. So what is pulling down your margin compared to where it was before the BSNL deal?

Samir Saxirian, Chief Financial Officer, TCS: So a good comparison would be the year on year margin. And, yes, it’s 20 basis points down on a year on year basis. Through the year, like we have called out on the quarterly basis also, we have, continued to make investments investments in people like we had called out in q four. And, overall, the investments which are required for long term growth in this quarter as well. We invested in capacity.

We invested continued our investments, and that is what is reflecting into it. Having said that, if you look at it, the the capacity versus the demand contraction mismatch leads to the other carrying an excess capacity or additional capacity, which should help us in our future demand. So going forward, we should be able to further tighten our operating leverage. And, Kumar, if you remember last quarter, we had said that if uncertainty continues, we might have impact or lower operating leverage.

Kumar Rakesh, Analyst, BNP Paribas: Thanks, Sameer for that. Just one clarification on the international revenue to be similar to last year, which you have spoken about. Is that in USD terms you’re talking about or constant currency? Because on a full year basis, we’ll have a sizable cross currency impact.

Samir Saxirian, Chief Financial Officer, TCS: No, constant currency terms. Like to like the national revenue to international revenues, constant currency terms.

Gaurav Rateria, Analyst, Morgan Stanley: Got it. Great.

Kumar Rakesh, Analyst, BNP Paribas: Thanks a lot. That’s all from my side.

Conference Operator: Thank you. We’ll take our next question from the line of Ankur Rudra from JPMorgan. Please go ahead.

Samir Saxirian, Chief Financial Officer, TCS: Hi, thank you. And the

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: first question is on terms of

Ankur Rudra, Analyst, JPMorgan: the weakness you’ve seen across a range of industries and you did highlight it’s a little bit the trade affected sectors and geopolitics in general. Could you also mention if there’s any kind of I wouldn’t say pricing pressure, but any kind of out of turn demand for productivity pass through that you may be seeing in across industries, perhaps more because of the current demand environment?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: It’s one the on good pricing has been reasonably stable at the overall level. But if you ask, like, is there any demand on productivity? There are instances where higher large deal coming up. There is a demand for productivity either and we don’t see much coming as a pure discount, but coming as, yeah, infused productivity or generic, otherwise, also normal productivity. We do say see the the demand coming for them.

But it is not industry specific. I would say it’s more based on the size of the deal or the tenure of the deal.

Ankur Rudra, Analyst, JPMorgan: Will this impact the revenue conversion from the signings? Because you’ve had our book to bill at about 1.3 for a while, but the revenues just haven’t picked up. I understand some of it is more near term because of the the the recent trade uncertainties.

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: But do you

Ankur Rudra, Analyst, JPMorgan: think AI infused productivity pass throughs might impact the revenue conversion we might have in the medium term?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Revenue conversion from signing is not impacted because of the productive because usually, the productivity is given up at the time of signing. So once we sign, we don’t see demands on productivity during the term of the deal normally. If at all it happens, it will be very, very rare. So but there are that we are giving a as I said, yeah, increased productivity, but it’s better than the when we sign the deal itself.

Ankur Rudra, Analyst, JPMorgan: Okay. Thank you for the clarification. Could you talk a bit about how the pipeline replenishment is going on? I understand in the near term, there’s been some deferrals and and delays. But in terms of overall pipeline formation, how’s that, you know, progressing?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Okay. The bottom pipeline has remained quite strong. Both I see we measured in terms of whether the pipeline from multiple industry verticals as well as geographies. On both dimensions, the pipeline has remained strong. We’ve been able to replenish all the deal closures that happened in Q1.

Ankur Rudra, Analyst, JPMorgan: Okay. Just last question on margins. Know, you did highlight that you’re investing in talent, which is why margins haven’t picked up despite the BSNL ramp down. Now you have a new BSNL contract that will be ramping up perhaps from the next quarter onwards. Isn’t there going to be a significant headwind on margins?

How should the margin trajectory be for the rest of the year? Are there any levers you might pull to hold your margins here?

Samir Saxirian, Chief Financial Officer, TCS: Yes. So Ankur, like I said, we invested into capacity and anticipating growth this quarter, while we saw a demand contraction, and we are at carrying capacity. And we will focus on so in terms of levers, we will focus on improving our operating leverage into Q2. And the key levers would be on improving our utilization, which took a hit this quarter, improving our productivity and focus on pyramid. These would be the levers, as you rightly called out, from a headwind perspective.

As we start delivering the second phase of the order, the the revenue mix might get slightly impacted. But overall, as in portfolio, we’d look towards improving margins from here.

Ankur Rudra, Analyst, JPMorgan: And this is a quick follow-up. How much of the utilization improvement is dependent on revenue growth on the international business? How much of

Samir Saxirian, Chief Financial Officer, TCS: the utilization? So this quarter, the international business saw a degrowth. It was 50 basis points degrowth versus if you see, we have added people through the quarter.

Ankur Rudra, Analyst, JPMorgan: I I get it. I was quest asking about second quarter or second or third quarter for you to be able to improve utilizations or optimize that. Isn’t that group dependent?

Nehal Shah, Investor Relations, TCS0: If you think

Samir Saxirian, Chief Financial Officer, TCS: of it, we will we will want to drive revenue growth, but we will look at optimization because there is capacity which is which is built up into the system. So we will not leave demand on the table, but we’ll also look towards optimization.

Ankur Rudra, Analyst, JPMorgan: Okay. Appreciate it. Thank you and best of luck. Thank

Conference Operator: you. We’ll take our next question from the line of Ravi Menon from Macquarie. Please go ahead.

Nehal Shah, Investor Relations, TCS1: Great. Thank you for the opportunity. Sameer, it looks like there has been significant hiring probably at the mid and senior levels because I see that despite the BSL contract pass through costs going down, so direct costs have not gone down as much. Would that interpretation be right?

Samir Saxirian, Chief Financial Officer, TCS: Hari. Can you repeat the question? The early part of the question?

Nehal Shah, Investor Relations, TCS1: Yes. Sorry, I’m down with a bad flu. So was asking there has been significant mid density level hiring because your direct costs have not gone down much, you know, in proportion to the BSL and possible cost.

Samir Saxirian, Chief Financial Officer, TCS: We haven’t called out whether I mean, the hiring has been across and the

Milin Lakkar, Chief Human Resources Officer, TCS: This would go on cost not going down.

Nehal Shah, Investor Relations, TCS1: Is is it better now? I can just repeat that one more time. I was just saying that, you know, with the BSL pass through cost, we would have expected to see a lot more decline in the direct costs. But it looks like, you know, the employee numbers are not up too much, but I think we’ve probably done a lot more within senior level hiring apart from the junior level hiring that we do with monthly.

Samir Saxirian, Chief Financial Officer, TCS: So, Ravi, so you would see a 70 basis points decline or positive impact because of lower third party expenses. And a similar like to like for employee costs. And this includes, as you rightly called out, not just the hiring. We have given additional QPM.

Nehal Shah, Investor Relations, TCS1: Okay. Right. Thanks. And BFSI, we’ve actually seen a slight decline Q o Q. This is, I’d say, kind of resets, right, the momentum that we had seen beginning of last year.

But banks have actually been reporting good results. Any positive signs that you’re seeing from banks customers now? Or this is expected to continue?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: I see this decline is coming from some other actually, a very, like, good part positive set up, it is a BFSI in North America and BFSI UK have a marginal growth. The decline came from BFSI in Europe. That’s also more driven by a a completion of a large engagement that we have taken. So but otherwise, actually, yes, there is some amount of delay, but I think the in LatAm, you pay particularly in the assessing or continuing their growth path.

Nehal Shah, Investor Relations, TCS1: One last question. On the high-tech side, you know, that’s where we had seen the spending cut start. Now that seems to be trending up. And this is where we’ve also seen some of your peers have to pass on significant productivity improvements. It looks like you’re not seeing any of any such demands, right?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: By and large, we are seeing a growth in accepting one or two clients. We are seeing strong growth in the high-tech segment.

Nehal Shah, Investor Relations, TCS1: All right. Thanks so much and best of luck.

Conference Operator: Thank you. We’ll take our next question from the line of Abhishek Patak from Motilal Oswal. Please go ahead.

Nehal Shah, Investor Relations, TCS2: Yes. Hi. Thanks for the opportunity. So the first question was around the new BSNL, order we received in May. When do we expect this to ramp up?

I mean, is is is this gonna be a one shot ramp up in February and then ramp down, in the next quarter? That’s the first question. And the second question is around, margins again. I understand, you know, that we are carrying excess capacity. But considering we have attrition, you know, trending upwards of 13%, you know, why, why would we, carry this capacity?

I mean, do we expect a materially better h two, with regards to growth, in anticipation of which we are holding this capacity? Because our cost of revenues, the employee cost at 47.6% is probably at an all time high. And considering we will have DSNL headwinds coming in February as well as a potential wage hike, just trying to understand how much of this will be offset by the operating leverage that we are expecting. So those were the two questions. Thank you.

Samir Saxirian, Chief Financial Officer, TCS: Okay. Abhishek, first, on the the SNL deal, we just pursued an advanced purchase order. So this is not in the TCV yet. We are awaiting several wise POs. Once we get it, then the execution starts.

Once the several wise POs are available, you can expect execution similar on a similar trajectory to the one we delivered on the 100,000 times. Coming to margins, your question was in terms of why are we is it in anticipation of our demand? We added people in q one in anticipation of of what we want to service in q one, and what happened to the q one was the reduction in or contraction in demand. That’s where we carried that excess capacity. So we we replanned it, but it did not q one did not plan out as we had planned for.

Nehal Shah, Investor Relations, TCS2: Understood. So so just to sort of follow-up, our employee costs are, as I was mentioning, almost at an all time high. So as as growth picks up, we expect that to materially trend trend downwards towards the 45% range, let’s say, over the next two, three quarters. That’s where we should be expecting those gains to come from?

Samir Saxirian, Chief Financial Officer, TCS: So two clarifications I like to do, Abhishek. One is if you are comparing sequentially q four versus q one, then employee cost as a percentage of revenue might not be directly comparable. It’s because the the revenue mix is different. There was a significant third party component sitting in the revenue. Having said that, your question in terms of current revenues or employee cost at 47%, should we be trying to optimize it?

Yes. We’ll look towards optimizing that and bringing that percentage of revenue downwards. Understood. Thank you.

Ankur Rudra, Analyst, JPMorgan: Thank you.

Conference Operator: Thank you. We’ll take our next question from the line of Nitin Padmanabhan from Investec. Please go ahead.

Nehal Shah, Investor Relations, TCS0: Yes. Hi. Good evening. Thank you for the opportunity. You sounded pretty cautious on BFSI overall in the commentary.

But if I look at the deal wins on a trailing twelve months, BFSI deal wins seem to be up 12%. So if you could just help contextualize, are you seeing any rescoping downwards or any such thing? Or it was just a broader comment?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Like, you see, like, every other industry, Nathan, there are some places where there is a project pause or scope reduction. But otherwise, I should be still we are continue quite positive in the medium to long term on the BFSA based on, like, what you pointed out, the with order book closure since the last year. But there are instances where there is a delay on this co production that has also come up.

Nehal Shah, Investor Relations, TCS0: Alright. So so just to understand, on a sequential basis, last quarter versus this quarter, would you characterize that the demand is actually, at least from an environment perspective, has got worse or it’s the same for BFSI specifically and across the board as well?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Like, if you look at a revenue basis, you can see that our revenue has a overall drop, but there’s a very minor growth in, as I mentioned before, in North America and UK, but it’s a very minor growth. So it is, I would say, to some extent, geography specific. Like, North America and Europe demand in BFSI is even stable. And Europe, we are seeing a contraction. But if you take it from a TCV perspective, we don’t want to get a quarter on quarter comparison on TCV because it tends to be lumpy.

Like, some some quarters, you’re saying very big deal, and some deal closures also happen towards the end of the quarter. So we don’t want to go by a quarter on quarter TCV comparison.

Nehal Shah, Investor Relations, TCS0: Got it. But just from a pure way because there is a dichotomy. Right? Our deal wins over the last three quarters, the this one, has been pretty decent, actually. On one hand, the deal wins are decent.

You seem to have a good pipeline. But on the other hand, we seem to be seeing maybe the rescoping and the negative surprises on demand like we saw this quarter. So from that perspective, now what exactly how would you sort of explain this? Because people seem to be signing, but they don’t seem to be executing.

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Mister, like, what’s happening is some of the deal where the clients decide that they can reprioritize or I was explaining in our d scope. I was explaining in the earlier person. There was one particular large client where they decided that if maybe the particular work can be done, they can delay the work or extend the period where the work can be done, and they they ramp down the number of people that are engaged. It’s so here, the deal was neither canceled, not paused, but the duration of the deal was increased to give them more time to manage their spend. So or there are some places where we find the projects are started but started on a lower base.

And there are some places where the projects are passed for a duration. So you see a combination of all these things, which together bring this scenario of overall deal signings are okay, pipeline is okay, But the immediate quarter, revenue numbers are not in sync with what we should be expecting.

Nehal Shah, Investor Relations, TCS0: Got it. Just one last clarification from my end. For the, you are actually currently assuming that the international business should be better, in the following quarter. And, BSNL, it will take time until the POs come through for the actual execution to take place. Those two are a fair understanding?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: They can, like, as you know, we don’t give any specific data. But on the international revenue part, we are more optimistic on the coming quarter. And what is the other question?

Samir Saxirian, Chief Financial Officer, TCS: We are awaiting the

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Awaiting BSNL PO, we are awaiting.

Nehal Shah, Investor Relations, TCS0: Got it. Got it. Thank you so much, and all the very best.

Conference Operator: Thank you. Next question is from the line of Abhishek Gupta from Axis Asset Management. Please go ahead.

Nehal Shah, Investor Relations, TCS3: Hello. Thank you so much for taking my question. So my mostly the question is like on the North America side, I think, the last twelve quarters, seems to be kind of flat to slightly negative. So North America being one the market, like, where where are we losing in this market, and why is it not growing in absolute basis for it?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Abhishek, I will not call it as

Conference Operator: losing any Abhishek, can you please mute your line? There’s background disturbance on your line. Thank you. Sir, please go ahead.

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: I’m sure it’s all not characterized as losing any market share in North America. For starters, we are participating almost in all major engagements, and we are also winning our fair share, and that that is consistent or improving. But overall, as we explained, like, we are winning, there are instances where you have project delays or random, which is causing the the growth to be offset. So that’s the reason that’s one way I think result you see. So I don’t think that we are actually losing anything in North America.

Nehal Shah, Investor Relations, TCS3: Got it. So and lastly, from my side is, like, if I look at your clients’ metrics, there seems to be two clients have inside has gone down from 100,000,000 bucket. So that’s is it a concerning point for other investor, or how do you look at the at the metric?

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: So, Rishi, whenever there is a revenue reduction, it’s concerning. So we are worried. But at the same time, it need not you see, it’s at a while the client could be for instance, we are measuring it based on last twelve months revenue. So if the particular client, in the borderline or, let’s say, 101,000,000, And because of this overall reduction in revenue, the client moved from 101 to even 99.5. We’ll no longer contact particular customer as a $100,000,000 client.

So it’s a concern, but do we see is it something that you worry about? I will not. Because once the growth return, these customers will be back onto the 100,000,000 plus change. And there are some cases, even because of the cost current the currency may cost currency moment also, customers move back and forth, and they they’re in the model in case. They may move back and forth between 100,000,000 above.

Because it is $100,000,000

Nehal Shah, Investor Relations, TCS3: Got it. That’s it for me. Thank you.

Conference Operator: You. Next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.

Gaurav Rateria, Analyst, Morgan Stanley: Hi, thanks for taking my question. My first question is trying to understand the investments that we talked about on creating capacity as well as on building talent pool. Is there some specific hiring going on that is up fronted in the cost and that is why the employee cost in absolute terms is up by $150,000,000 while the number of employees have not increased significantly. Just trying to understand why there is a big jump in employee cost in the last two quarters whereas our international revenues have largely remained flat.

Samir Saxirian, Chief Financial Officer, TCS: Varun, as I clarified, it is not just adding people. We have given higher QE as well this quarter. Last quarter, we had called out about tactical interventions, which was in terms of promotions.

Gaurav Rateria, Analyst, Morgan Stanley: Got it. My second question is on, the conversations that we are having at the time of renewals. Have you seen more conversations around infusing the generative AI technology on the renewals? And where would we be in our journey of taking this technology to our top 100 clients? Let’s say, have we already reached out to our top 100 clients and trying to proactively use this technology and infuse that in all our existing work package?

Just trying to understand where are we measuring.

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Hello? You’re right. Whenever there is a renewal, there is we just go go back to them with the come up with a solution. But to be honest, we don’t wait to include any further renewal in most of our clients. Whenever we see opportunity, yeah, a in solution can be give better productivity and better outcome for our customers.

We proactively do that. And we do it in almost all kinds, whether it’s a cost optimization program or it is a transformation program. We whenever we look for the opportunity, we look for it in every phase of the project and every type of project.

Gaurav Rateria, Analyst, Morgan Stanley: Got it. Last question, Krithi, on agentic AI solution. How are the contracts structured with the clients? Is it largely in the form of fixed price projects, or is it also being sold at some license fee? Just trying to understand how are we trying to monetize our solutions around the agent API.

Thank you.

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: So this is a this is a evolving space. What we find is there are some customers that you’ll see multiple opportunities. There are some that we do based on the outcome. There are some customers that expect that this is better to do it on t and m. Because as it is evolving, they also want to see how the results are they’re able to benefit from the results.

So they want to do it on t and m, and then after a period of time, move towards the fixed price model. So we are seeing both options here as well.

Gaurav Rateria, Analyst, Morgan Stanley: Thank you.

Conference Operator: Thank you. Ladies and gentlemen, we’ll take that as the last question for today. I now hand the conference over to the management for closing comments. Over to you.

Krithi Vasan, Chief Executive Officer and Managing Director, TCS: Thank you, operator. In Q1 FY ’twenty six, our revenue declined by 3.1% year on year in constant currency with an operating margin of 24.5% and a net margin of 20.1. Our TCV was robust at 9,440,000,000.00 US dollars in q one. We are closely monitoring development worldwide and remain committed to maintaining strong client relationships, positioning ourselves as a strategic partner. I would like to express my gratitude to all PCSs for their hard work and unwavering dedication in realizing both their own potential and that of the company.

With that, we wrap up our call today. Thank you all for joining Thank you.

Conference Operator: Thank you, members of the management. On behalf of TCS, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.

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