TCS Q3 Results Review – Beats estimates despite demand constraints

Tata Consultancy Services Ltd. reported revenue of $7.28 billion in Q3 FY24, up 1.0% QoQ in constant currency terms and 140 basis points above our estimates despite a weak demand environment and seasonal weakness.

The growth was aided by strong India performance (up 26% QoQ, partially aided by BSNL deal execution).

TCS reported deal wins of $8.1 billion (down 28% QoQ but up 3% YoY, book-to-bill ratio at 1.1 times), in line with our expectations.

Ebit improved 70 bp QoQ to 25.0%, 50 bp ahead of our estimates, aided by lower subcontracting costs and cost savings, which more than compensated for adverse seasonality.

Q3 headcount declined 5700 (-1% QoQ). Attrition (last twelve months) declined by 160 bp QoQ to 13.3%. TCS expects attrition to continue to soften in the near term.

Reported profit after tax was negatively impacted by a onetime cost of $115 million associated with legal payout to Epic System.

Management commentary regarding the spending environment in IT services remains unchanged, with continued pause in discretionary deals adversely affecting business. While the company views its deal pipeline and booking as robust, it continues to expect improvement in client sentiment after the positive commentary by the U.S. Fed in December 2023. NDTV Profit