TCS Profit Tops Estimates After Outsourcer Wins New Deals
(Bloomberg) -- Tata Consultancy Services Ltd.’s second-quarter profit topped analysts’ estimates after the Indian software services exporter won more deals, helping it weather a slowdown in tech spending by corporations.
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Net income rose 8% to 104.3 billion rupees ($1.3 billion) in the three months through September, the company said Monday in a statement. Analysts estimated 102.9 billion rupees on average. Sales advanced 18% to 553.1 billion rupees.
TCS, which kicked-off the earnings season for Indian companies, and its IT rivals such as Infosys Ltd. have so far remained positive on winning business transformation deals from clients in North America and Europe. But uncertainty in Europe due to the war between Russia and Ukraine and concerns of a global recession are intensifying, leading some customers to cut back on discretionary tech spending.
“There is that increasing sense that we need to be wary of uncertainties,” TCS Chief Executive Officer Rajesh Gopinathan told reporters in Mumbai after the earnings. “Will we be totally insulated? Very difficult to say. But our intent will be to stay very close to the customers and minimize the impact of volatility.”
Indian IT service providers are also grappling with rising employee costs amid stiff competition for tech talent. Attrition at Asia’s biggest outsourcer rose to 21.5% from the previous quarter’s 19.7%.
What Bloomberg Intelligence Says
We anticipate pricing to remain relatively stable, lead by its largest financial services segment. We also expect management to tread cautiously on its outlook for 2023 IT budgets.
- Anurag Rana, analyst
Click here for research.
TCS, the largest player in India’s $227 billion tech services industry that employs more than half a million workers around the world, doesn’t typically provide a sales outlook. Over the long-term, the company and its peers are betting on services such as cloud computing, artificial intelligence, machine learning and analytics to shore up revenue.
Earlier this year, TCS revamped its organization with specialized groups to target startups as well as large global enterprises as it eyes $50 billion in annual sales before 2030.
(Adds comment from CEO in fourth paragraph.)
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