TCS Q3 results: Net profit jumps 12% to Rs 12,380 cr, revenue swells 5.6%

An uncertain macro environment and slow discretionary spending on the part of its clients in major markets, coupled with seasonality weaknesses owing to furloughs, affected the third-quarter (October-December 2024) FY25 performance of India’s largest information-technology services player, Tata Consultancy Services (TCS).

 

TCS’ net profit for the third quarter, at Rs 12,380 crore, was up 11.9 per cent over Rs 11,058 crore in the same quarter of FY24.

 

In Q3FY24 TCS had a one-time settlement of legal claims of Rs 958 crore. Taking this into consideration, net profit growth year-on-year (Y-o-Y) was 5.5 per cent.

 

Revenue grew 5.6 per cent at Rs 63,973 crore in the quarter concerned. Sequentially it was down 0.4 per cent. In dollars, revenue was down 1.7 per cent and went up 3.6 per cent Y-o-Y.

 

 

The company missed meeting Bloomberg estimates. According to the estimates, revenue was expected at Rs 64,748 crore and net profit at Rs 12,534 crore.

 

The surprise, and a positive point, was the order books. The total contract value (TCV) came in strong at $10.2 billion in the quarter. In Q1 and Q2 it was $8.3 billion and $8.6 billion, respectively.

 

K Krithivasan, chief executive officer and managing director, said though the company experienced negative constant-currency growth across major geographies, he was confident about better growth in CY25 than in CY24.

 

“We are pleased with the excellent TCV in Q3, but we want to emphasise that TCV is growing in North America and in the BFSI (banking, financial services, and insurance) and CPG (consumer packaged goods) segments. We also see an improvement in sentiment on discretionary strength,” he said during the media briefing.

 

He, however, said the company would still be in wait-and-watch mode on sectors like health care and manufacturing.

 

The company’s Q3 performance was similar to that in the second quarter, when expansion was driven by growth markets. Majority markets such as the United States and Europe continued to be soft. The Indian market grew 70.2 per cent. In Q2, the Indian market grew 95.2 per cent Y-o-Y. This was primarily due to the deal with Bharat Sanchar Nigam Ltd.

 

Middle East & Africa, Asia Pacific, and Latin America grew 15 per cent, 5.8 per cent, and 7 per cent, respectively.

 

North America was down 2.3 per cent Y-o-Y. Within Europe, the United Kingdom grew 4.1 per cent and Continental Europe was down 1.5 per cent.

 

Shaji Nair, research analyst, Capital Market Strategy, Mirae Asset Sharekhan, said: “Commentary on early signs of revival in discretionary spend in some verticals is positive and is likely to set a good undertone for CY25. TCS in Q1 reported mixed results with slightly larger than expected revenue decline in a seasonally soft quarter while margins have shown an uptick with improving deal wins. We have ‘buy’ rating on the stock.”

 

Among the verticals growth was driven by energy, resources, and utilities (3.4 per cent), and consumer business (1.1 per cent). The company’s largest vertical, BFSI, was up 0.9 per cent, slightly better than the 0.1 per cent reported in Q2.

 

On GenAI, Krithivasan said it was becoming an integral part of deals and many were ramping up spend.

 

During the quarter the company’s headcount was down 5,370. The fall is after two straight quarters of addition.

 

The operating margins for the quarter came in at 24.5 per cent, a decline of 50 basis points.

 

Samir Seksaria, chief financial officer, said: “In a quarter that saw significant cross-currency volatility, TCS’s strong execution, cost management and deft currency-risk management helped deliver healthy margin improvement and free cash flows. Disciplined investment in talent and infrastructure should lend good support to long-term business growth.”

 

Biswajit Maity, senior principal analyst, Gartner, said: “In 2025, Generative AI will be a key focus for chief investment officers, driving business transformation, boosting productivity, and improving processes. Overall, 2025 shows a much stronger outlook than 2024. However, it is crucial for TCS to focus on improving service delivery, resource management, and the quality of its deliverables. Customer feedback has raised concern in these areas, and failing to address these issues could impede TCS’ growth and long-term success.”

 

TCS declared a third interim dividend of Rs 10 and a special dividend of Rs 66 per equity share of Rs 1.