TCS — earnings call

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Prepared remarks

Moderator · Conference Operator

Ladies and gentlemen, good day, and welcome to the TCS Earnings Conference Call.

As a reminder, all participant lines will be in the listen- only mode and there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone.

Please note that this conference is being recorded.

I now hand the conference over to Ms. Nehal Shah from the Investor Relations team at TCS.

Thank you, and over to you.

Nehal Shah

Thank you, operator.

Good evening, and welcome, everyone.

Thank you for joining us today to discuss TCS' financial results for the first quarter of fiscal year FY 2026 that ended on June 30, 2025.

This call is being webcast through our website and an archive, including the transcript, will be available on the site for the duration of this quarter.

The financial statements, quarterly fact sheet and press releases are also available on our website.

Our leadership team is present on this call to discuss our results.

We have with us today Mr. K Krithivasan, Chief Executive Officer and Managing Director.

K Krithivasan

Hello, everyone.

Nehal Shah

Ms. Aarthi Subramanian, Executive Director, President and Chief Operating Officer.

Aarthi Subramanian

Good evening, everyone.

Nehal Shah

Mr. Samir Seksaria, Chief Financial Officer.

Samir Seksaria

Hello, everyone.

Moderator · Conference Operator

Thank you very much.

We'll take our first question from the line of Sudheer Guntupalli from Kotak Mahindra AMC.

Please go ahead.

Sudheer Guntupalli

Hi, team.

Thanks for the opportunity.

Krithi, just a couple of questions.

So apart from the BSNL deal, are there any other client-specific situations you might be going through in any vertical or geography?

K Krithivasan

No, there is no specific client situation now.

Sudheer Guntupalli

Okay, sir.

And just some clarification on your comment in the Press Meet, are you still reiterating that FY '26 will be better than FY '25 at the overall company level or more so you're talking about the core markets?

K Krithivasan

Sudheer, at this time we are confident the international market will do better in FY '26 than FY '25.

However, it is our aspiration to continue to drive growth in company overall growth itself.

But it is like a high bar to cross but we will work towards that.

Sudheer Guntupalli

Understood, sir.

And last question from my end.

So, you mentioned that by July end, probably we'll see some clarity in pent-up demand.

From the time that U.S. started announcing the trade deals with major trading partners like China, U.K., etcetera.

Are you seeing that the peak of the uncertainty is already behind and there is some amount of improvement in the client decision making process?

K Krithivasan

We have not started seeing that so far, Sudheer.

Because as we know, like even with China, unless they have framework deal like the actual deal and tariffs are not being announced.

And my guess is that till almost all the trade deals are announced, there will be this lack of clarity.

Sudheer Guntupalli

Got it.

Thank you so much.

Moderator · Conference Operator

Thank you.

We'll take our next question from the line of Kumar Rakesh from BNP Paribas.

Please go ahead.

Thank you.

We'll take our next question from the line of Ankur Rudra from JP.

Morgan.

Please go ahead.

Ankur Rudra

Hi.

Thank you.

My first question is in terms of the weakness you've seen across a range of industries, and you did highlight it's a little bit the trade affected sectors and geopolitics in general.

Could you also mention if there's any kind of -- I wouldn't say pricing pressure, any kind of out-of- turn demand for productivity pass-through that you may be seeing in across industries, perhaps more because of the current demand environment?

K Krithivasan

Ankur, pricing has been reasonably stable at an overall level.

But if you ask like is there any demand on productivity, there are instances where large deals are coming up for re-negotiation, there is a demand for productivity, either -- we don't see much coming as a pure discount, but

Moderator · Conference Operator

Thank you.

We'll take our next question from the line of Ravi Menon from Macquarie.

Please go ahead.

Ravi Menon

Thank you for the opportunity.

Samir, looks like there has been significant hiring, probably at the mid and senior levels, because I see that despite the BSNL contract pass-through costs going down, direct costs have not gone down as much.

Would that interpretation be right?

Samir Seksaria

So Ravi, so you would see a 70 basis points decline on positive impact because of lower third-party expenses and a similar like-to-like increase

Moderator · Conference Operator

Thank you.

We'll take our next question from the line of Abhishek Pathak from Motilal Oswal.

Please go ahead.

Abhishek Pathak

Yes.

Hi, thanks for the opportunity.

The first question was around the new BSNL order we received in May.

When do we expect this to ramp up?

I mean, is this going to be a one-shot ramp up in 2Q and then ramp down in the next quarter?

That's the first question.

And the second question is around margins, again.

I understand that you are carrying excess capacity.

But considering we have attrition

Moderator · Conference Operator

Thank you.

We'll take our next question from the line of Nitin Padmanabhan from Investec.

Please go ahead.

Nitin Padmanabhan

Yes.

Hi, good evening.

Thank you for the opportunity.

You sounded pretty cautious on BFSI overall in the commentary.

But if I look at the deal wins, on a trailing 12 months, BFSI deal wins seem to be up 12%.

So, if you could just help contextualize, are you seeing any re-scoping downwards or any such thing?

Or was it just a broader comment?

K Krithivasan

Like every other industry, Nitin, there are some places where there is a project pause or scope reduction.

But otherwise, as we said, we are continuing to be quite positive in the medium-to-long-term on the BFSI based on, as you rightly pointed out, the order book closures in the last year.

But there are instances of delays or scope reductions that have come up.

Nitin Padmanabhan

Right.

Just to understand, on a sequential basis, last quarter versus this quarter, would you characterize that the demand is actually, at least from an environment perspective, has got worse or it's the same for BFSI specifically and across the board as well?

K Krithivasan

If you look at a revenue basis, you can see that the revenue has an overall drop, but there is a very minor growth in North America and UK So, it is, to some extent, geography specific.

North America and UK demand in BFSI has remained stable and Europe has seen a contraction.

But if you take it from a TCV perspective, we don't want to get a quarter- on-quarter comparison on TCV because it tends to be lumpy, like some quarters you sign very big deal and some deal closures also happen

Moderator · Conference Operator

Thank you.

Next question is from the line of Abhishek Gupta from Axis Asset Management.

Please go ahead.

Abhishek Gupta

Hello.

Thank you so much, sir, for taking my question.

Sir, mostly the question is like on the North America side, if I take the last 12 quarter CQGR, it seems to be kind of flat to slightly negative.

So North America being one of the biggest markets, like where are we losing in this market?

And why -- is it not growing on an absolute basis for us?

K Krithivasan

Abhishek, I will not characterize it as losing any market share in North America.

For starters, we are participating in almost all major engagements.

And we are also winning our fair share and that is consistent or improving.

But overall, as we explained, like, while we are winning, there are instances where you have project delays or ramp down, which is causing the growth to be offset.

So that is what the end result you see.

So, I do not think that we are actually losing anything in North America, Abhishek.

Abhishek Gupta

Got it.

And sir, lastly, from my side, if I look at your client's metrics, there seems to be two clients -- in size have gone down from US$100 million buckets.

Is it a concerning point for as an investor or how do you look at the metrics?

K Krithivasan

So, Abhishek, whenever there is a revenue reduction, it's concerning.

So, we are worried.

Our client metrics are based on last 12 months’ revenue in dollar terms.

Moderator · Conference Operator

Thank you.

Next question is from the line of Gaurav Rateria from Morgan Stanley.

Please go ahead.

Gaurav Rateria

Hi, thanks for taking my question.

My first question, I am trying to understand the investments that we talked about in creating capacity as well as on building talent pool.

Is there some specific hiring going on that is upfronted in the cost?

And that is why the employee cost in absolute terms is up by $150 million, while the number of employees has not increased significantly.

Just trying to understand why there is a big jump in employee costs in the last 2 quarters, whereas our international revenues have largely remained flat?

Samir Seksaria

As I clarified, it is not just adding people.

We have given a higher QVA as well this quarter.

Last quarter, we had called out about tactical interventions, which were by way of promotions.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, we'll take that as the last question for today.

I now hand the conference over to the management for closing comments.

Over to you.

K Krithivasan

Thank you, operator.

In Q1 FY '26, our revenue declined by 3.1% year- on-year in constant currency with an operating margin of 24.5% and a net margin of 20.1%.

Our TCV was robust at US$9.44 billion in Q1. We are closely monitoring developments worldwide and remain committed to maintaining strong client relationships, positioning ourselves as a strategic partner.

I would like to express my gratitude to all TCSers for their hard work and unwavering dedication in realizing both their own potential and that of the company.

With that, we wrap up our call today.

Thank you all for joining us.

Thank you.

Moderator · Conference Operator

Thank you, members of the management.

On behalf of TCS, that concludes this conference call.

Thank you for joining us, and you may now disconnect your lines.

Note

This transcript has been edited for readability and does not purport to be a verbatim record of the proceedings.