TCS Q3 Results: Digital transformation deals, cloud, AI projects lead growth

Tata Consultancy Services (TCS), India’s largest IT services firm, reported a 6% increase in consolidated revenue from operations for Q3 FY25, reaching ₹63,973 crore, up from ₹60,583 crore in Q3 FY24. The company’s consolidated net profit rose to ₹12,380 crore, compared to ₹11,058 crore in the same period last year, with a sequential increase of 4%.

Despite Q3 being a typically weak season for IT companies, TCS experienced strong total contract value (TCV) growth, driven by investments in cybersecurity, artificial intelligence (AI), and generative AI partnerships. CEO K Krithivasan expressed satisfaction with the diverse TCV performance, which enhances long-term growth visibility. He noted a recovery in the banking, financial services, and insurance (BFSI) and consumer business group (CBG) sectors, alongside promising signs of increased discretionary spending.

The major IT firms, including TCS, Infosys, Wipro, and HCL, plan to significantly increase their revenues from the Indian market, leveraging the country’s digital transformation and the rising adoption of AI technologies. In November 2024, TCS extended its contract with the System for Pension Administration Raksha (SPARSH) for automating pension processes for defense personnel and expanded its partnership with the Bank of Baroda for a financial inclusion solution.

Internationally, TCS secured contracts with Landis+Gyr for energy efficiency solutions, Telenor Denmark for IT infrastructure management, Air France-KLM for digital transformation, and the Irish Department of Social Protection for a retirement savings scheme. It also partnered with the Bank of Bhutan to enhance its digital core and expanded its collaboration with Nvidia to develop tailored solutions across various sectors.

TCS has launched the TCS 5A Framework for Responsible AI in partnership with AWS, aimed at identifying and mitigating AI risks. The Banking, Financial Services, and Insurance (BFSI) and Consumer Business Group (CBG) sectors led growth in TCS’ service offerings.

TCS reported a net decline of 5,370 employees in Q3, reversing two-quarters of growth, with a total workforce of 607,354. Despite this, TCS promoted over 25,000 associates this quarter, bringing the total for the financial year to over 110,000. The decline in headcount was attributed to geopolitical uncertainties, currency volatility, and challenges in Europe and the US.

According to Gartner, TCS remains a key partner for clients, aligning with market needs as IT spending in India is projected to grow by 10-12%. Analyst Biswajit Maity said that businesses are expected to allocate budgets to Artificial Intelligence (AI) and generative AI in 2025, transitioning from proof of concepts to production, which will benefit companies like TCS.

Another Tata Group company, Tata Elxsi reported a 3.6% decline in net profit to ₹199 crore for the December 2024 quarter, down from ₹206.43 crore in the previous year, and a 13.3% sequential decline from ₹229.43 crore in the September 2024 quarter.