- TCS shares rose over 2% after strong Q2 revenue and profit results were reported
- Q2 revenue was Rs 73,188 crore, up 1.3% sequentially, net profit grew 4% to Rs 13,884 crore
- US suspended TCS and others from green card program over H-1B visa misuse investigations
Shares of Tata Consultancy Services Ltd. opened over 2% higher on Friday, as investors cheered the company's second-quarter scorecard while overlooking the potential headwinds arising from the United States suspending the company from its green card programme.
TCS, on Thursday, posted a Q2 revenue of Rs 73,188 crore, up 1.3% sequentially. This was largely in line with the estimate shared by the analysts tracked by Bloomberg. The net profit, however, topped the estimates as it came in at Rs 13,884 crore, up 4% as compared to the preceding quarter.
The company's earnings before interest and taxes rose 1.4% sequentially to Rs 17,553 crore, whereas the margins rose marginally to 24% from 23.95% in the first quarter.
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Notably, the stock opened 0.48% higher at Rs 2,086 apiece on the NSE on Friday, and minutes into the trade, it surged 2.12% to Rs 2,120.1.
The market overlooked Washington's action against a slew of IT companies, including India's Infosys, TCS, Wipro, for what it alleged as an abuse of the H-1B visa programme. The US Labor Department on Thursday suspended the three companies, along with Cognizant, Capgemini, Microsoft and Adobe from the country's Permanent Labor Certification (PERM) programme, citing multiple active federal investigations.
"The H1-B visa program is meant to allow companies to bring in really the best of the best from outside the United States of America for positions that are completely impossible to fill with American workers. Unfortunately, the program has become rife with fraud," US Vice President JD Vance said on Thursday.
Following the announcement, the American Depository Receipts of Infosys and Wipro—the two Indian IT majors traded in the US via ADRs—fell about 3%, signalling weakness for Indian IT stocks in the subsequent session.
However, the initial market reaction shows that TCS remains attractive for Indian investors following its September quarter performance.
AI Surge, Strategic Deals
What has boosted the investor optimism is the surge in TCS' annualised AI revenue, and the strategic deals that the company inked during the second quarter. The company noted that it has logged massive momentum in artificial intelligence, with the annualised revenue now crossing the $3.1 billion mark. This means AI services now account for more than 10% of the total topline.
TCS also listed its five-year strategic partnership with Porsche AG. As a core part of this agreement, TCS will acquire a 100% stake in MHP, the Germany-based management and IT consulting subsidiary of Porsche. The Indian IT bellwether also highlighted its agreement to transition Best Buy's Global Capability Center in India over to TCS. This facility will be transformed into a dedicated AI Capability Center to develop advanced AI-powered solutions.
“This quarter we announced two unique deals with Porsche and Best Buy which represent a new category of transformation partnerships. Together with our clients, we are building repeatable value platforms that will industrialize AI at scale,“ said K Krithivasan, Chief Executive Officer and Managing Director.
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