Asia IT leader TCS lags estimates on weak tech spending
TATA Consultancy Services’ (TCS) quarterly profit missed analysts’ estimates, a sign that clients from banks to retailers remain hesitant to commit to large investments on information technology.
Net income rose 5 per cent to 119.1 billion rupees (S$1.9 billion) for the three months to September. Analysts, on average, projected 125.5 billion rupees. Sales rose 7.7 per cent to 642.6 billion rupees.
Mumbai-headquartered TCS leads a US$250 billion Indian industry that helps major corporate clients around the world adopt automation, cloud computing and artificial intelligence (AI). A slowing global economy and military conflicts have spurred caution around big ticket software or services investments, though a bigger-than-anticipated US rate cut last month could reassure enterprises to some extent.
CEO K Krithivasan said on Thursday that TCS’ key banking, financial services and insurance business in North America was showing signs of resurgence.
“Financial institutions in the US are looking at sustaining the growth momentum with the Fed’s first rate cut in four years,” Krithivasan said in an analyst call after the earnings announcement. “With the easing of interest rate environment, consumer confidence and industry confidence will get better. This can potentially lead to improved investment.”
TCS and homegrown rivals such as Infosys emerged as outsourcing giants a few decades ago by offering cheap back-office solutions to the world’s biggest corporations, giving rise to the term “Bangalored”. And as their clients grew, they became important partners to companies seeking to transform their business. TCS’s smaller rival reports quarterly results later this month.
The company is one of the crown jewels of the cars-to-steel Tata conglomerate, which is trying to position itself as an Indian leader in technology beyond software and services. This week, the Tata group announced the death at 86 of longtime chairman Ratan Tata, who helped build the 156-year-old business into a global operation with US$165 billion in revenue.
Among TCS’s partners is OpenAI-backer Microsoft. The outsourcer is counting on that relationship to develop AI-based services for clients – key to the longer-term growth of the outsourcing industry.
Shares in TCS ended 0.6 per cent lower in Mumbai before the earnings. BLOOMBERG
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