TCS Q1 Results: Net profit up 16.8%, Q1 order book grows to $10.2 billion, clients focus on exploring generative AI

TCS reported 16.8 percent increase in net profit on a year-on-year YoY basis in the quarter ended June 30, 2023, driven by a strong growth in total contract value TCV deal wins despite a tough business environment.

Consolidated revenue for the quarter came in at Rs 59,381 crore, marking an on-year surge of 13 percent. In constant currency terms, the revenue grew by 7 percent YoY.

In dollar terms, the revenue grew by 4 percent as against the previous quarter to $7,226 million, the company said in a release.

The numbers are in line with the muted estimates amid a weak demand environment. Sequentially, the country’s largest software services exporter grew by a modest 0.4 percent, which is its slowest growth in the last 12 quarters. The net profit declined by 3 percent as against the March quarter.

TCS reported a strong order book of $10.2 billion for the first quarter of fiscal year 2024. Beating macroeconomic headwinds in the United Kingdom this quarter, the IT services major surpassed its quarterly deal win guidance of $7-9 billion.

The total contract value for Q1 was up by 24.39 percent on a year-on-year (YoY) basis as compared to $8.2 billion reported in Q1FY23. Last quarter, TCV stood at $10 billion.

TCS is proactively building differentiating capabilities in generative AI and actively working on such projects with its clients, delivering impact on technology, operations and client experience dimensions.

The growth was driven by the UK market which grew at about 16.1 percent YoY in constant currency (CC) terms. Among major markets, North America grew 4.6 percent and Continental Europe grew 3.4 percent. In emerging markets, Middle East & Africa grew 15.2 percent, India grew 14 percent, Latin America grew 13.5 percent, and Asia Pacific grew 4.7 percent.

Key segments like banking, financial services and insurance (BFSI) grew at 0.2 percent QoQ, manufacturing at 1.5 percent QoQ, retail at 1.1 percent QoQ and communication slipped by 1 percent QoQ while life science grew at 0.8 percent QoQ – showing signs of continued pressure in these segments especially BFSI and communication.

According to the company, there is a strong focus across verticals to “engage with TCS to explore generative AI use cases around productivity improvement, content creation and enriching customer interactions etc.”

K Krithivasan, Chief Executive Officer and Managing Director, said: “It is very satisfying to start the new fiscal year with a string of marquee deal wins. We remain confident in the longer-term demand for our services, driven by the emergence of newer technologies. We are investing early in building capabilities at scale on these new technologies, and in research and innovation, so we can maximize our participation in these opportunities.” In the UK Life and Pensions administration space, we signed three new deals on our digital insurance platform, making TCS the undisputed leader in this market on any metric.”

Major deal wins this quarter include several billion dollar plus deals in the UK such as the $1.1 billion deal from UK’s National Employment Savings Trust, a $1 billion plus deal with Marks & Spencer, a 10-year contract with UK’s Teacher’s Pension Scheme and another deal with the Phoenix Group to name a few.

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