A slow start to FY26 for TCS

Having successfully navigated a challenging macroeconomic environment in FY25 to both deliver yoy top line growth of 4.2% and cross the $30bn annual revenue mark (see here), TCS found the going in Q126 considerably tougher. Turnover for the three months ended 30th June declined by 3.1% yoy at constant currency to $7.42bn with slowdowns evident across most aspects of the firm’s vertical industry and geographic portfolio. The weaker sales performance did not, however, adversely affect TCS’s profitability as operating margin for the period improved qoq by 30 bps to 24.5%.

All of TCS’s geographic units experienced a sequential softening in their expansion rates during the recently completed quarter. The company’s North American business, which accounts for around a half of firm-wide turnover and had struggled to grow in FY25, saw its Q1 revenues contract by 2.7% (Q425: -1.9%). The UK&I, which had seen its sales rise by 4% in the prior fiscal, also took a turn south during the first quarter. The top line in the region dipped by 1.3% yoy to c.£928m.

In terms of the offshore major’s industry sector focuses, only TCS’s Technology & Services vertical gained any momentum during Q126 as its revenues improved by 1.8% yoy to c.$600m (Q425: 1.1%). The company’s Life Sciences & Healthcare, Communications & Media and Regional Markets units, conversely, all suffered significant declines. Turnover in the latter, which had jumped by nearly two fifths in FY25, receded by almost 9% yoy in during the first three months of new fiscal.

There was more encouraging news to be found on the bookings front. Q126 total contract value rose by 15% yoy to $9.6bn with sales of all TCS’s new service offerings reported to have grown well. In the UK this included securing another seven-year extension of its long running Virgin Atlantic partnership with an AI-focused deal (see here).

TCS is always quick off the blocks in posting its quarterly results. It will be interesting to see whether the company’s softer start to FY26 is echoed in the numbers of its rivals as their first quarter figures are reported over the next couple of weeks. It is very unlikely, however, that TCS is alone in feeling the effects of continuing global macro-economic and geo-political uncertainties (see our latest Market Trends & Forecasts 2025 report for more details).

Posted by: Duncan Aitchison at 22:30

Tags: results   offshore   IT+services