TCS falls as rare annual revenue drop dulls quarterly earnings beat, deal wins

Shares of Tata Consultancy Services fell nearly 3% on Friday after a rare annual revenue drop outweighed strong deal wins and a quarterly earnings beat, suggesting sustained growth recovery remains elusive amid weak client spending and rising costs.

The stock was on track for its worst day in nearly a month and was set to snap a six-session gaining streak.

It was the third-biggest decliner on the IT index and the benchmark Nifty 50.

The IT index was down 2.2%, even as the Nifty 50 was trading 0.9% higher.

TCS beat fourth-quarter earnings estimates and reported $12 billion in deal wins, but analysts were disappointed by a 2.4% drop in its full-year dollar revenue - its first annual decline since listing.

India’s TCS beats quarterly revenue estimate on AI-led demand

Despite sequential improvement during the quarter, the full-year revenue drop underlined prolonged caution in clients’ technology budgets, said Dolat Capital.

Jefferies analysts echoed the view, saying the results offered limited evidence of any meaningful uptick in demand and that an uncertain growth outlook could drive underperformance in the stock.

U.S.-listed shares of TCS’ smaller rivals Infosys and Wipro also lost nearly 2% overnight.

While TCS’ margins edged up 10 basis points during the quarter, analysts cautioned that upside could be limited.

BOBCaps said higher subcontracting costs, wage hikes and continued investments in AI platforms could cap near-term margin expansion.

TCS shares have slumped nearly 20.5% so far this year, compared with a 19% drop in the IT index, as concerns of AI-led disruption and weak client spending persist. The benchmark Nifty 50 index is down 8.2% year-to-date.