TCS Q3 Results: Net Profit Rises 12%, Revenue Grows 5.6%

Tata Consultancy Services (TCS) reported a net profit of ₹12,380 crore for the third quarter (October-December 2024) of FY25, reflecting an 11.9% increase compared to ₹11,058 crore in the same quarter of FY24. Adjusting for a one-time legal settlement of ₹958 crore in Q3 FY24, the year-on-year (Y-o-Y) net profit growth was 5.5%.

Revenue for the quarter stood at ₹63,973 crore, marking a 5.6% increase Y-o-Y but a 0.4% sequential decline. In dollar terms, revenue was down 1.7% sequentially but grew 3.6% Y-o-Y. However, the company missed Bloomberg estimates, which had pegged revenue at ₹64,748 crore and net profit at ₹12,534 crore.

Strong Order Book Amid Challenges

Despite the subdued revenue performance, the total contract value (TCV) was a highlight, reaching $10.2 billion in Q3. This was a notable increase from $8.3 billion in Q1 and $8.6 billion in Q2. The order inflows were driven by growth in North America, along with the BFSI (banking, financial services, and insurance) and CPG (consumer packaged goods) segments.

K Krithivasan, CEO and Managing Director, stated that while constant currency growth remained negative across key geographies, he was optimistic about achieving better growth in the calendar year 2025 compared to 2024.

Regional and Market-Specific Insights

The Indian market continued to perform exceptionally well, growing 70.2% Y-o-Y in Q3, primarily supported by a large deal with Bharat Sanchar Nigam Ltd (BSNL). Other regions showed moderate growth, with the Middle East & Africa growing 15%, Asia Pacific at 5.8%, and Latin America at 7%. However, North America contracted by 2.3% Y-o-Y.

In Europe, the United Kingdom grew by 4.1%, but Continental Europe experienced a decline of 1.5%. Growth in the company’s largest vertical, BFSI, was modest at 0.9%, improving slightly from 0.1% in Q2. Other sectors, such as energy, resources, and utilities, grew 3.4%, while the consumer business segment grew 1.1%.

Generative AI and Technology Investments

TCS continued to invest in cutting-edge technologies like Generative AI (GenAI), which has become an integral part of client deals. Krithivasan highlighted that many clients are ramping up their spending on GenAI, which is expected to drive business transformation, productivity, and process improvements in the coming year.

Operating Margins and Cost Management

Operating margins for the quarter stood at 24.5%, down 50 basis points compared to the previous quarter. Samir Seksaria, Chief Financial Officer, attributed the performance to strong execution, cost management, and currency risk management amid significant cross-currency volatility. He emphasised that disciplined investments in talent and infrastructure would support long-term growth.

Dividends Declared

TCS announced a third interim dividend of ₹10 per share and a special dividend of ₹66 per equity share with a face value of ₹1.

Looking Ahead

Krithivasan expressed optimism about the future, citing strong order inflows and improving client sentiment in key markets like North America. However, he noted that the company remains cautious about sectors like healthcare and manufacturing, adopting a wait-and-watch approach.

TCS Q3 results performance underscores both its resilience in navigating a challenging macroeconomic environment and the opportunities ahead as it positions itself for stronger growth in 2025.

TCS share price opened at ₹4,200.00 and reached a high of ₹4,225.00 today, with a gain of ₹161.15 (3.99%) as of 9:55 am IST on January 10.

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