Tata Consultancy Services reported steady growth figures for the fiscal third quarter, with net profits up 1.1% amid easing margin pressure and continued strong order momentum. India’s largest IT services firm also saw lower attrition along with robust cash generation.
TCS Maintains Industry-Leading Profitability
Consolidated revenue for the October-December 2023 period jumped 8.4% year-over-year to $7.075 billion in constant currency terms, slightly below estimates. Operating margin contracted 50 basis points annually to 24.5%. Still, TCS maintained industry-leading profitability levels.
Net income rose 1.1% to $1.318 billion during the seasonally weak quarter even as rivals including Infosys and Wipro posted declines. The company generated 102.8% of net profit as operating cash flows amounting to $1.354 billion.
“We are pleased with our strong growth in a seasonally weak quarter, especially after a couple of very strong quarters in the first half of this fiscal year,” said Chief Executive Officer and Managing Director Rajesh Gopinathan.
Record Order Book At $7.8 Billion
TCS continued winning large deals during the reporting quarter, ending December 2023 with a record order book tally of $7.8 billion. The 1.1 book-to-bill ratio indicates future revenue visibility as customers locked in contracts despite macro uncertainty.
Management commentary exuded confidence in sustained technology investments by clients over coming year as companies seek to boost competitiveness. TCS flagged particular momentum in markets like North America, Latin America, Asia Pacific and India.
The company remains on track to meet its double-digit revenue growth guidance for the current 2023-24 fiscal year based on the strong year-to-date show and deal wins momentum. Investors cheered the reassuring outlook.
More Read
Adding Next-Gen Capabilities
Talent retention also showed gradual improvement after TCS went on an hiring spree over the past eighteen months to fulfill rising demand.
Net headcount declined by 2,197 workers sequentially as seasonal exit of trainees and cross-skilling initiatives balanced robust fresher onboarding. But attrition rate among IT services employees moderated further to 21.3% compared to 21.5% last quarter.
Meanwhile, TCS expanded gender diversity with women now making up 35.7% of the workforce spanning 153 nationalities. It also progressed skilling initiatives, with employees gaining 1.3 million competencies during the quarter via 11.4 million learning hours.
The company invested aggressively into boosting capabilities around artificial intelligence, cloud platforms, cyber security and other next-generation technologies to unlock evolving client requirements.
“Looking ahead, and beyond current uncertainties, technology demand will likely continue to stay strong as enterprises focus more on tech-led growth and transformation initiatives,” noted TCS COO NG Subramaniam. The strategy seems to be paying off so far amid still buoyant outsourcing activity by global corporations.