India's TCS skids on demand recovery worries after Q2 revenue miss
Shares of India's Tata Consultancy Services fell as much as 1.8 per cent on Thursday, as investors worried that a recovery in demand was still not within reach after second-quarter revenue missed estimates due to weak client spending.
The poor results and commentary from India's largest IT services provider took the shine off TCS' $2 billion share buyback announcement, and also slammed shares of peers.
The Nifty IT index dropped 1 per cent on Thursday, with Infosys and HCLTech - both scheduled to report results later in the day - falling about 1 per cent each.
TCS' revenue rose 7.9 per cent to 596.92 billion rupees ($7.18 billion) in the September quarter, it said after market hours on Wednesday, but fell short of the analysts' estimates of 602.44 billion rupees.Read More : Netflix delivers mixed earnings with stock sliding 8% as revenue misses forecasts "Broad-based revenue weakness and sharp headcount decline in the second quarter along with muted hiring outlook suggest that demand recovery is not yet in sight," Jefferies analysts wrote in a note, cutting their fiscal 2024 revenue growth forecast by 70 basis points to 4.3 per cent.
Employee headcount at TCS declined by 6,333 during the quarter.
Jefferies, however, added that large deal wins were likely to lead to better growth in the second half of the year.
The company's profit marginally beat estimates due to higher margins.
Still, Nomura analysts said that weak growth, limited scope to lower subcontract expenses and a return to office for TCS' entire staff would limit margin improvement in the current fiscal year.
In the post-earnings press conference, TCS also hinted that there was no clear picture of when discretionary spends will return.
The company's results set the tone for a $245 billion-industry that is staring at an uncertain demand environment in the key U.S. and European markets, amid inflationary pressures and high interest rates.
TCS shares are currently down 1.5 per cent, bringing year-to-date gains to 11.4 per cent, compared with the IT index's 13 per cent rise this year.
The poor results and commentary from India's largest IT services provider took the shine off TCS' $2 billion share buyback announcement, and also slammed shares of peers.
The Nifty IT index dropped 1 per cent on Thursday, with Infosys and HCLTech - both scheduled to report results later in the day - falling about 1 per cent each.
TCS' revenue rose 7.9 per cent to 596.92 billion rupees ($7.18 billion) in the September quarter, it said after market hours on Wednesday, but fell short of the analysts' estimates of 602.44 billion rupees.
Employee headcount at TCS declined by 6,333 during the quarter.
Jefferies, however, added that large deal wins were likely to lead to better growth in the second half of the year.
The company's profit marginally beat estimates due to higher margins.
Still, Nomura analysts said that weak growth, limited scope to lower subcontract expenses and a return to office for TCS' entire staff would limit margin improvement in the current fiscal year.
In the post-earnings press conference, TCS also hinted that there was no clear picture of when discretionary spends will return.
The company's results set the tone for a $245 billion-industry that is staring at an uncertain demand environment in the key U.S. and European markets, amid inflationary pressures and high interest rates.
TCS shares are currently down 1.5 per cent, bringing year-to-date gains to 11.4 per cent, compared with the IT index's 13 per cent rise this year.
Source: www.channelnewsasia.com
