TCS shares drop 2.5% after Q1 results; CEO says company facing 'demand contraction', rules out double-digit growth in FY26

In what may constitute a change to earlier commentary, the managing director and chief executive officer (CEO) K. Krithivasan said he expects the international revenues to fare better in FY26 as compared to the year-ago period. In April, the company had said that the overall revenue growth in FY26 will be better than FY25.

Speaking to reporters at its office in Mumbai, Krithivasan explained the delays in decision-making experienced in the preceding quarter have "intensified" now and hoped for the discretionary spends – a prime mover of revenue growths for IT companies – to return once the uncertainties ebb.

There are positive signs with the trade deals being signed by the US and also some challenging of the legislations going through in its largest market, he said, hoping for some clarity on the aspects restraining clients from spending by the end of this month or early August.

TCS Q1 FY26 Numbers

The country's largest IT services company on Thursday reported a 6% growth in June quarter (Q1 FY26) net profit at ₹12,760 crore, helped by a jump in non-core income even as revenues grew at a tepid pace.

The rupee revenue grew 1.3% to ₹63,437 crore during the quarter but was down by over 3% on a constant currency (CC) basis, as the company faced headwinds in its major markets amid a winding down of the BSNL deal, which helped it in recent quarters.

The other income for the company jumped to ₹1,660 crore from ₹962 crore logged last year, thanks to a one-time write-back of income tax paid earlier, which helped the company's bottom line.

The operating profit margin narrowed to 24.5% as against 24.7% in the year-ago period, even as the wage hikes – which typically crimp the margins – are yet to set in.

Its chief of human resources, Milind Lakkad, said the company is yet to decide on its wage hikes and added that it is maintaining its fresher hiring target as of now.

Chief financial officer Samir Seksaria said the company continues to aspire to pushing the operating profit margin into the 26-28% level and added that it is taking into account all the facets as it chases the aspirational level.

Deal Wins

TCS signed new deals of $9.4 billion during the quarter, Krithivasan said, adding that the ongoing difficulties are inhibiting clients from signing up for cost optimisation deals and instead going for cost optimisation ones.

The pipeline across service lines continues to be strong, and the pricing is also stable at an overall level, though there may be some aberrations, the TCS management said.