TCS Faces First Revenue Decline in Over Four Years

Bengaluru: Tata Consultancy Services (TCS) has reported its first year-on-year decline in constant currency since the September quarter of FY21. This downturn is attributed to a combination of weak macroeconomic conditions, cautious client sentiment, delayed decision-making, and the conclusion of the BSNL deal.

The company's revenue for the June quarter fell by 3.1% year-on-year in constant currency and 3.3% sequentially, with geopolitical uncertainties further dampening demand.

CEO's Outlook and Analysis

TCS CEO K Krithivasan highlighted that the sequential degrowth was -3.3%, with -0.5% attributed to international revenue and the remaining -2.8% due to the BSNL deal winding down. Despite the current challenges, Krithivasan remains optimistic about the future, expecting international revenue in FY26 to surpass FY25's overall revenue.

"It is too early to specify when growth will resume, as this largely depends on greater clarity emerging in the macroeconomic environment," Krithivasan said.

Market Performance and Challenges

Operating margin saw a slight decrease to 24.5% from 24.7% a year earlier but improved by 30 basis points sequentially. The North American market, TCS's mainstay, experienced a 2.2% year-on-year decline in constant currency, while India reported a sharp 21.7% drop, largely due to the BSNL deal's conclusion.

"The threshold for ROI has risen, causing more projects to be put on hold," Krithivasan added, explaining the delays in project starts due to clients' unclear return on investment expectations.