TLDR: Tata Consultancy Services (TCS) announced a 3.1% constant currency revenue decline for Q1 FY26, reaching ₹63,437 crore (US$7.42 billion), signaling a challenging start to the fiscal year for the Indian IT sector. Despite robust deal closures totaling $9.4 billion and growth in new services, the company’s performance was impacted by global macroeconomic and geopolitical uncertainties, which led to demand contraction. While net profit rose 6% year-on-year to ₹12,760 crore, largely aided by non-core income, generative AI services have not yet fully offset the broader slowdown.
Mumbai, India – Tata Consultancy Services (TCS), India’s largest IT services company, has reported a challenging first quarter for the fiscal year 2025-26 (Q1 FY26), with revenue declining by 3.1% on a constant currency basis. The company’s revenue for the quarter ended June 30, 2025, stood at ₹63,437 crore, equivalent to US$7.42 billion. In rupee terms, revenue saw a modest 1.3% year-on-year increase, but remained largely flat quarter-on-quarter compared to Q4 FY25.
K Krithivasan, CEO and Managing Director of TCS, attributed the demand contraction to “the continued global macro-economic and geo-political uncertainties.” He further noted that delays in decision-making, observed in the preceding quarter, have intensified. Despite these headwinds, Krithivasan highlighted positive aspects, stating, “On the positive side, all the new services grew well. We saw robust deal closures during this quarter. We remain closely connected to our customers to help them navigate the challenges impacting their business, through cost optimization, vendor consolidation and AI-led business transformation.”
Net profit for the quarter rose by 6% year-on-year to ₹12,760 crore, a gain significantly bolstered by a jump in non-core income, including a one-time write-back of income tax paid earlier. The operating profit margin slightly narrowed to 24.5% from 24.7% in the year-ago period.
Deal closures remained strong, with TCS securing new deals worth $9.4 billion in Total Contract Value (TCV) during the April-June period. While this marks a decline from $12.2 billion in the previous quarter, it exceeded market expectations of $8-9 billion. Krithivasan expressed comfort with the volume of deals closed this quarter.
Despite the company’s emphasis on Artificial Intelligence, particularly generative AI, specific AI-led deal wins were not disclosed, and there was no clear evidence that GenAI services have fully offset the broader demand slowdown. This contrasts with Q1 FY25, when the company reported a generative AI pipeline of $1.5 billion. However, Aarthi Subramanian, the newly appointed Chief Operating Officer, stated that there is significant interest in AI offerings, with agentic AI featuring strongly in client conversations, especially for business process services (BPS).
Geographically, North America, TCS’s largest market contributing 48.7% of revenue, reported a 2.7% decline in constant currency. The UK saw a 1.3% fall, and India experienced a significant 21.7% de-growth, largely due to the winding down of the BSNL deal. Continental Europe also declined by 3.1%. Conversely, Latin America reported a 3.5% increase, Asia Pacific grew by 3.6%, and Middle East and Africa saw a robust 9.4% increase, all in constant currency.
From an industry perspective, BFSI (Banking, Financial Services, and Insurance), the largest contributor at 32.0% of revenue, grew by 1.0%. Technology and Services increased by 1.8%, and Energy, Resources, and Utilities by 2.8%. However, several sectors faced declines: Consumer Business (-3.1%), Life Sciences and Healthcare (-9.6%), Manufacturing (-4.0%), Communication and Media (-9.6%), and Regional Markets and Others (-8.6%).
In terms of workforce, TCS added 6,071 new employees during the quarter, bringing its total workforce to 613,069 as of June 30, 2025. Employee attrition on a trailing 12-month basis slightly increased to 13.8% from 13.3% in the prior quarter. The company also announced an interim dividend of ₹11 per share, payable on August 4, 2025.
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Looking ahead, Krithivasan stated that he does not foresee a double-digit revenue growth for FY26, a shift from earlier commentary. He expressed hope for discretionary spending to return once global uncertainties subside, potentially by late July or early August.
