Profits steady, telecom drag visible, but AI deals and BFSI growth keep momentum alive
Tata Consultancy Services (TCS), India’s largest IT services company, announced its earnings for the first quarter of the financial year 2025–26 on July 10, 2025. The results reflected steady performance, despite some pressure from specific contracts and global economic challenges. The following article breaks down the key figures, business drivers, sector performance, and expectations for the quarters ahead.
Strong Net Profit and Revenue Growth
TCS reported a net profit (also known as profit after tax) in the range of ₹12,205 to ₹12,416 crore for the quarter ending June 2025. This marks a growth of about 1% to 3% compared to the same period last year. The company’s revenue stood between ₹62,613 and ₹64,993 crore, showing a year-on-year growth of around 2.7% to 3.8%.
On the surface, these numbers suggest stable performance. However, deeper analysis shows that much of the revenue growth came from favorable currency movements. In constant currency terms, excluding the impact of exchange rate changes, the revenue remained mostly flat. This means actual business volumes grew slowly, but currency changes gave a boost when the earnings were calculated in rupees.
Telecom Project Slowdown Impacts Growth
One of the biggest challenges TCS faced in this quarter was the scaling down of a major telecom project for Bharat Sanchar Nigam Limited (BSNL). The BSNL contract was a large one and had previously added to the company’s revenues. As the contract started winding down, it created a noticeable gap in earnings, especially from the telecom sector.
Many analysts had already expected this impact and predicted that the telecom segment would weigh down the overall revenue numbers. Some reports estimated a 0.4% decline in revenue growth when adjusted for constant currency, due to the BSNL effect.
Despite this, the rest of the business remained largely stable. TCS managed to keep revenues on track by controlling costs and taking advantage of favorable foreign exchange rates.
Margins Stay Firm with Cost Discipline
TCS succeeded in protecting its profit margins through strict cost control. The company held back on wage hikes during the quarter, helping reduce expenses. Also, the ongoing wind-down of the BSNL contract allowed it to redirect resources and save on project-related costs.
As a result, the company’s operating profit margins stayed in the range of 24% to 26.6%, depending on estimates from different brokerages. While this is slightly lower compared to the same time last year, it shows an improvement from the previous quarter. These margin levels are considered healthy for the IT industry, especially in a quarter with limited growth.
New Deals and Industry Trends
Despite the telecom setback, TCS continued to win new deals. The total value of contracts signed during the quarter reached around $8 to $9 billion. This indicates that clients still trust TCS to handle large technology projects, although some of these new deals may take time to turn into actual revenues.
In terms of sectors, the banking, financial services, and insurance (BFSI) division performed well and contributed about 30% of total revenues. However, sectors like retail, manufacturing, telecom, and travel showed weaker demand. These sectors were affected by slower economic activity in major global markets.
Analysts also observed that ongoing trade tensions and new tariffs could affect technology spending, especially in the U.S. and Europe. TCS’s future earnings will depend in part on how companies in these regions respond to economic uncertainty.
Market Reaction and Share Performance
Leading up to the earnings announcement, TCS’s share price dropped slightly, about 0.8%. Investors were cautious, expecting only modest profit and revenue growth. After the results, the market will watch closely for signals in the company’s outlook. Whether the share price moves higher or lower will depend largely on the management’s guidance for the rest of the financial year.
Some experts believe that if the company offers strong guidance for the next few quarters, shares could bounce back. On the other hand, if growth continues to be limited, the stock may remain under pressure.
What Analysts Are Watching Next
With the earnings for the first quarter out, attention now turns to what lies ahead. Analysts are focused on several important areas:
Whether tech spending in North America and Europe will pick up in the coming months
How the company plans to manage its workforce and wage hikes
The potential for growth from artificial intelligence and digital transformation services
How quickly can the company replace the lost revenue from BSNL with new projects
Whether operating margins will remain stable or face pressure in the next few quarters
Some brokerage firms expect TCS to show steady performance in the second half of the year, especially if new deals start to generate revenues. However, others have reduced their long-term growth forecasts due to global economic challenges.
Focus on AI, Cloud, and Strategic Partnerships
TCS continues to invest in key growth areas such as artificial intelligence (AI), cloud services, and software platforms. It has partnered with global technology giants like Microsoft and NVIDIA to bring advanced AI solutions to its clients.
These partnerships aim to deliver smart automation, data analytics, and digital transformation across industries. The company is also promoting innovation through its AI labs and internal research programs. These investments may not impact short-term earnings immediately, but they are expected to shape TCS’s future growth.
Industry Outlook and Peer Watch
TCS is the first major IT company to announce results for Q1 FY26. Its performance often sets the tone for the rest of the industry. Other companies like Infosys, Wipro, and HCL Technologies will report their earnings in the coming weeks. If they also show similar trends, slow growth but stable margins, it would confirm that the entire sector is moving through a cautious phase.
The global IT services market continues to face pressure from inflation, currency fluctuations, and trade tensions. However, companies with diversified portfolios and strong client relationships, like TCS, are expected to manage better than smaller players.
Final Thoughts
TCS has posted a steady set of results for the first quarter of FY26, showing modest growth in profits and revenues. While the wind-down of the BSNL contract affected its performance, the company balanced this out through cost control and strong deal wins. The banking and financial sector remained strong, while other sectors showed mixed results.
Looking ahead, the company’s ability to turn its large order book into actual revenue, manage wage costs, and grow its AI and digital services will be key to its performance. TCS’s management commentary in the coming quarters will provide further clarity on how the company plans to navigate global challenges and tap into new opportunities.
