TCS stages strong Q3 boosted by Cloud demand, market share gain as attrition eases

TCS Q3 Results: Tata Consultancy Services (TCS) — India’s largest IT services company — reported a sequential increase of four per cent in net profit to Rs 10,846 crore for the October December period, driven by Cloud demand and market share gains. According to Zee Business research, the IT giant was estimated to report a quarterly net profit of Rs 11,270 crore. 

The company’s quarterly revenue increased 5.3 per cent on a quarter-on-quarter basis to Rs 58,229 crore, according to a regulatory filing. That, however, was better than the estimate of Rs 57,280 crore by Zee Business reserarch. Tata Consultancy Services’ management said its revenue growth was led by its North America and UK operations. 

TCS said its revenue in dollar terms crossed the $7 billion mark. According to Zee Business research, the IT firm’s revenue in dollars was pegged at $6,970 million for the quarter.

TCS CEO Rajesh Gopinathan said its strong growth in a seasonally weak quarter was driven by Cloud services, market share gains through vendor consolidation, and continued momentum in North America and the UK.

The company’s order book stood at $7.8 billion for the December quarter, lower than $8.1 billion for the previous three months, according to the filing.

“The sustained strength of demand for our services is a validation of the value we provide to our clients in helping them differentiate themselves, while enhancing their competitiveness. Looking ahead, and beyond current uncertainties, our longer-term growth outlook remains robust,” Gopinathan added.

Revenue from the banking, financial services and insurance segment increased 4.9 per cent sequentially. 

Segment Sequential change – Q3 vs Q2 (%) Revenue (in crore rupees)
BFSI 4.9 22,145
Manufacturing 5 5,428
Retail and consumer 4.6 9,661
Communication, media and tech 4.2 9,753
Lifesciences and healthcare 5.9 6,354
Others 10.2 4,888

Attrition at TCS eased by 20 bps sequentially to 21.3 per cent (12-month basis), as the IT firm saw a net decrease of 2,197 in headcount to 6,13,974. The company’s management said it expects attrition to ease further in the coming months. 

TCS reported an operating margin — a key measure of profitability — of 24.5 per cent, marking improvement of 50 bps compared with the previous quarter. 

Improved productivity, currency support and abating supply-side challenges helped TCS expand its operating margin, CFO Samir Seksaria said. “This gives us greater confidence in our ability to steer our profitability towards our preferred range, while continuing to invest in building newer capabilities to support our growth and market share gains,” he said.

The company’s board declared a dividend of Rs 75 per share including a special dividend of Rs 67 per share.

TCS said its total shareholder payout for the current financial year so far stood at Rs 33,297 crore.

The TCS stock ended with a gain of Rs 107.7 or 3.4 per cent at Rs 3,319.7 apiece on BSE ahead of the earnings announcement.  

Catch all highlights of TCS results here | Check out highlights of the January 9 session on Dalal Street

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