TCS earnings growth gets squeezed by slowing economies across the world

• Tata Consultancy Services (TCS) announced its Q2 earnings for the current financial year.
• TCS reported a profit of ₹8,042 crore and revenue of ₹ 38,172 crore.
• It also added 14,097 employees to its roster — the highest ever number of employees onboarded in a quarter.

Tata Consultancy Services (TCS) shares fell by 3.65% as the share market opened today trading at ₹1931.20.

Stock brokerages have cut estimates on the stock performance of TCS after a muted performance in the second quarter.

Morgan Stanley has trimmed their estimates by 1- 3.5% with a target of ₹1980 per share. Phillips Capital also downgraded their estimates but expect that growth will pick up during the next financial year as strong deal momentum, lower attrition and strong cash flow kick in.

Tata Consultancy Services (TCS)’s net profit for the second quarter stood at ₹8,042 crore which is a percent lower than last quarter’s ₹8,131 crore.

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Its revenue grew by 2% to ₹38,977 crore, as compared to ₹38,172 crore in the last quarter.

“We ended the quarter with steady growth despite increased volatility in the financial services and retail verticals,” said Rajesh Gopinathan, CEO and MD of TCS.

TCS brought 14,097 employees onboard this quarter — the highest ever number of employees added in a quarter. It plans to add another 30,000 freshers to its ranks before the current financial year ends.


It’s also paying out ₹45 per share, which includes ₹40 as special dividend..

On a yearly basis, the IT giant's revenue grew by 5.8% led by a boom in its digital vertical, which grew by 27.9%. In fact, digital revenue is one-third of TCS' total revenue this quarter.

Other verticals that have contributed significantly to TCS' revenue include life science and healthcare, which grew at a yearly growth rate of 13.3% and communications and media, which grew by 11.8%.

Incremental weakness is coming in for TCS from retail, both in the US and in Europe. There is no change in the trend of Banking and Financial Services (BFSI), indicating that its continued to stay weak. The combination of global trend continue to remain a challenge for TCS.

TCS’ pre-tax profits came in at ₹9,361 crore with profit margins at 24% — slightly lower, by 0.2%, as compared to the last quarter.

See also:
TCS plans to add 30,000 freshers to its ranks to reshape its cost structure