TCS Q1 Results: Tata Consultancy Sales Drag As Cautious Clients Hold Back Tech Spends

Tata Consultancy Services Ltd. reported a decline in sales on a constant currency basis due to tariff wars and geopolitical troubles around the world that have led to clients being cautious on technology spending.

Asia’s biggest outsourcer Thursday posted sales of 634.37 billion rupees ($7.4 billion) in the first quarter through June, marking an annual decline of just over 3% in constant currency, an adjustment in financials done by software services exporters to account for currency fluctuations. The growth in TCS’ revenue is the lowest since the beginning of fiscal 2021, according to data compiled by Bloomberg.

“Overall, it will be too early to call out when growth will resume, which to a great extent depends on more clarity emerging in the macroeconomic scenario,” TCS Chief Executive Officer K. Krithivasan told a news briefing in Mumbai, where the company is headquartered. TCS is “still confident and optimistic” that international revenue in the current fiscal through March 2026 would be better than the previous year, he said.

Global trade and geopolitical uncertainties have driven clients to pause projects or delay projects where the return on investment is not immediate, Krithivasan said.

Even so, the company’s new-age offerings in artificial intelligence, cybersecurity and cloud computing have performed well, Chief Operating Officer Aarthi Subramanian said. 

TCS posted net income of 127.60 billion rupees in the first quarter, a rise of 6% compared with the same period a year ago. Analysts, on average, forecast 122.53 billion rupees.

TCS leads India’s $280 billion software services industry that’s trying to maintain growth as customers cut costs to cope with uncertainties created by US President Donald Trump’s tariffs regime, and wars in Ukraine and the Middle East. The direct impact on Indian outsourcers is limited, but economies and the businesses they host can suffer.

Shares in TCS have fallen more than 17% this year, hit by concerns that software services exporters may get caught in the global tumult. Rivals Infosys Ltd. and Wipro Ltd. have also plummeted.

TCS and smaller rivals began by providing back-office services to large multinational corporations, and have since grown to offer a range of cloud, automation and artificial intelligence services to companies such as Apple Inc. and Bank of America Corp. Global rival Accenture Plc last month warned of economic and geopolitical uncertainty.

"Tata Consultancy Services’ 3% decline in constant-currency sales likely signals a further deterioration in IT spending demand, supporting our thesis that a recovery for the tech services industry this year is doubtful. We expect weakness to continue to stem from its main geographic regions of North America and Europe, driven largely by tariff and other geopolitical-related uncertainties."

- Anurag Rana and Andrew Girard, analysts