TCS Q2 revenue up 2.4% to $7.6 billion, adds 4,258 staffers

Bengaluru: TCS’s dollar revenue rose 0.2% sequentially and 2.4% year-on-year to $7.6 billion in the September quarter. Constant-currency growth stood at 0.5% quarter-on-quarter and 2.8% year-on-year, with sequential growth marking the company’s lowest for a September quarter in three years.Its total contract value (TCV) rose to $9.6 billion from $9.5 billion sequentially, supported by AI-led transformation engagements.TCS CEO K Krithivasan said the demand environment had not materially changed from the previous quarter, with discretionary programmes offering near-term value remaining muted. “Our primary opportunity and focus are on translating the advances in AI into a measurable business advantage,” he said. “On a medium-term basis, looking at the TCV and the pipeline, we are confident that the growth momentum will continue.”BFSI was the strongest large vertical and the biggest contributor to growth, expanding 2.5% sequentially and 3.9% year-on-year in constant currency.TCS’s annualised AI revenue crossed $3.1 billion, accounting for more than 10% of revenue. Aarthi Subramanian, president and COO, said the biggest opportunity was helping clients translate AI advances into business outcomes. “They (clients) are keen to invest the productivity benefits of AI into enterprise transformation initiatives that will make their organisations future-ready,” she said.Subramanian said TCS was seeing three distinct demand areas: AI-native solutions and business outcomes, AI-led transformation of enterprise systems, and autonomous global business services. Enterprises are also prioritising legacy data modernisation and building AI-ready data foundations.Operating margins were flat sequentially at 24%, but declined 120 basis points year-on-year. CFO Samir Seksaria said TCS had invested in strategic partnerships, M&A-related initiatives and hiring to build future capacity. “As we build future capacity and navigate demand transitions, we have invested in a higher bench and increased hiring of subcontractors to meet near-term skill and delivery requirements,” he said.Seksaria said TCS’s long-term margin aspiration remained 26%-28%, while its near-term priority was to invest for growth. The acquisition of Porsche Consulting arm MHP for $373 million is expected to weigh on margins by about 50 basis points, depending on the timing of closure and integration, he said. Normal furlough seasonality and continued investments would also be headwinds in the second half.“Some of the Q2 headwinds will start to taper off as the investments start delivering outcomes. ... We will try to balance growth and margins. While it is an uphill task, we will continue to endeavour to improve margins,” Seksaria said.Subramanian said AI-led deflation was still present in BFSI and high-tech, making it too early to conclude that productivity gains had been fully offset. However, AI was also driving modernisation and vendor-consolidation opportunities.TCS’s India revenue fell 10%, which Krithivasan attributed to the closure of a project. He said the decline was not structural, with the project expected to resume in subsequent quarters.TCS onboarded 10,000 freshers in the September quarter, compared with 14,000 in the preceding quarter. The company added 4,258 employees, taking its headcount to 5.9 lakh, while IT services attrition stood at 13.3% on a last-12-month basis.TCS declared a dividend of Rs 12 per share, with Oct 14 as the record date and Oct 30 as the payment date.You use AI every day. Now get your AI Quotient. Take the AIQ test.