TCS Q2FY25 results: Five key takeaways from September quarter results

The Tata Group firm’s net profit and revenue increased 5% and 7% year-on-year, respectively. While revenue marginally increased quarter-on-quarter, net profit declined.

Here’s a look at key financial metrics of the IT giant in the three-month period ending September 30, 2024.

Revenue, PAT and operating margin

In Q2FY25, the IT services provider reported consolidated revenue from operations at ₹64,259 crore, up 7% YoY from ₹59,692 crore in Q2FY24. Sequentially, the company’s revenue grew 2.6% from ₹62,613 crore in Q1FY25.

The revenue was in-line with the street estimates as experts predicted the IT giant would report revenue in the range of ₹63,938 to ₹64,172 crore for the September quarter.

TCS’ revenue from operations for the six month period ended September 2024 grew by over 6% to ₹1,26,872 crore compared to ₹1,19,073 crore in the corresponding period of the preceding fiscal.

The company’s consolidated profit after tax (PAT) grew over 5% YoY in Q2 to ₹11,955 crore compared to ₹11,380 crore in the same quarter of the preceding fiscal. The net profit missed the street estimates. In comparison to Q1FY25, the profit-after-tax declined over 1% on a sequential basis.

According to experts, the company was expected to report 9-10% YoY growth in net profit in the range of ₹12,000 to ₹12,450 crore.

TCS’ PAT for the six month period ended September 30, 2024 grew by nearly 7% to ₹24,060 crore from ₹22,500 crore in the corresponding period of the preceding fiscal.

The company mentioned in a release that the revenue growth seen in Q2FY25 was led by the Energy, Resources and Utilities segments.

The company said that in Q2FY25, the contribution of its businesses from Indian markets to its revenue grew by 95.2% YoY followed by its business from Middle East & Africa (MEA) regions, which grew by 7.9% YoY and its Asia Pacific (APAC) business, which grew by 7.5%. The contribution to revenue from the company’s American business witnessed a 6.8% YoY growth in Latin American markets. However, the contribution of the North American market declined by 2.1% YoY.

The Tata Group company’s net income grew 5% in Q2FY25 to ₹11,909 crore. The company’s operating margin declined 0.2% YoY to 24.1. However, the company’s net margin stood at 18.5% in Q2FY25.

The IT major's EBIT margin also missed the estimates. The experts had projected operating margins to be around 24.2% to 25.1%.

Attrition rate at 12.3% In Q2FY25

The company informed the bourses that its total workforce stood at 612,724 as of September 30, 2024. The Tata Group company added 5,726 employees in the September quarter. Meanwhile, its attrition rate stood at 12.3% for the last twelve months.

The IT services company has 35.5% women in its workforce and employs people of 150 nationalities, according to the release.

Milind Lakkad, TCS's Chief HR Officer, said the company added 11,000 associates in the first six months of the year and that the campus hiring process for FY26 has also started.

“We welcomed 11,000 associates in the first half of the year, and we remain on track for trainee onboarding as planned. We have also commenced the campus hiring process for FY26,” Lakkad said.

Interim Dividend of ₹10 per share announced

The company’s board of directors approved a second interim dividend of ₹10 per equity share of a face value of ₹1 each for FY25. The company has set Friday, October 18, 2024, as the record date for the payment of the dividend. The company said that the second interim dividend is scheduled to be paid to eligible investors on Tuesday, November 5.

Management commentary

K Krithivasan, Chief Executive Officer and Managing Director, said that even amidst geopolitical instability the company’s Banking, Financial Services, and Insurance (BFSI) vertical showed signs of recovery. He added that the company also saw strong performance in its growth markets in the September quarter.

“We saw the cautious trends of the last few quarters continue to play out in this quarter as well. Amidst an uncertain geopolitical situation, our biggest vertical, BFSI showed signs of recovery. We also saw a strong performance in our Growth Markets. We stay focused on sharpening our value proposition to our clients, employees and other stakeholders,” Krithivasan said.

Samir Seksaria, Chief Financial Officer, said that the company’s long-term cost structures are unchanged despite investments in talent and infrastructure.

“We made strategic investments this quarter in talent and infrastructure to ensure sustainable growth. Our disciplined execution resulted in superior cash conversion. Our longer-term cost structures remain unchanged, and we remain confident in our ability to continue delivering industry leading profitable growth,” Sekaria said.

Major Deals in the September quarter and expansion plans

The Tata Group company said that while discretionary spending was impacted, clients continued to invest in AI and Generative AI. Additionally, domains such as Cyber Security, AI Cloud and TCS Interactive led the company’s growth in the September quarter.

Some of the major deals TCS undertook in Q2FY25 include expanding its partnership with Rolls-Royce, a British multinational that specialises in civil and defence aerospace services. As part of the partnership, TCS will leverage its domain knowledge of the aircraft manufacturing industry to support Rolls-Royce's engineering activities, such as system design, component design, supply chain support, and programme management.

TCS was also selected by Qantas to provide managed services for the airline's technology domains. The scope of the services TCS will provide to the airline includes airline experience, airline operations, commercial airline technology, corporate, and business-to-customer services.

TCS share price reaction

Ahead of the results, shares of TCS gained 0.96% to trade at an intraday high of ₹4,293.85 and closed flat at ₹4,227.9, down by 0.59%.

The Tata Group stocks were in focus on Thursday after Ratan Tata, the chairman emeritus of Tata Sons, died on Wednesday. Investors will keep an eye on the TCS stock after the IT giant missed street estimates in terms of net profit and margins.

The Tata Group IT bellwether cancelled its press conference and the management conference call in view of the death of Ratan Tata.