TCS Q2 results: Profit rises 5%, operating margins decline

Tata Consultancy Services ( TCS ), one of India’s leading IT companies, posted a 5 per cent year-on-year (YoY) increase in its net profit for the second quarter (Q2 FY25), covering the July-September period. However, despite an 8  per cent revenue growth, ongoing caution in global markets, particularly driven by geopolitical uncertainties, led to a slight dip in the company’s operating margin.

TCS Chief Executive Officer and Managing Director, K Krithivasan, highlighted that the cautious trends observed in previous quarters continued into this one. He pointed to some signs of recovery in the company’s biggest vertical, the Banking, Financial Services, and Insurance (BFSI) sector, which had been under pressure. He also highlighted strong performance in TCS' growth markets, reinforcing the company’s resilience in uncertain times.

During this quarter, TCS identified cybersecurity, AI Cloud, and TCS Interactive as its primary growth drivers. While discretionary spending in certain sectors took a hit, clients still invested in artificial intelligence (AI) and Generative AI solutions. TCS responded by setting up interdisciplinary AI centers of excellence (CoEs), positioning itself to implement AI at scale for clients.

The company also announced a Rs 10 per share dividend, with a record date of October 18 and a dividend payout set for November 5.

For Q2 FY25, TCS reported a consolidated net profit of Rs 11,909 crore, marking a 5  per cent increase from Rs 11,342 crore during the same period last year. Its revenue from operations stood at ₹64,259 crore, an improvement from ₹59,692 crore in Q2 FY24, reflecting a growth of 7.7  per cent. 

In constant currency terms, the company's revenue grew by 5.5  per cent. The operating margin for this quarter came in at 24.1  per cent, with the net margin at 18.5  per cent, though the operating margin saw a slight year-on-year decline of 0.2  per cent.

In terms of sectoral performance, the BFSI segment, which experienced a downturn last quarter, showed a minor recovery with 0.1  per cent growth in constant currency terms. The Consumer Business and Life Sciences & Healthcare segments also registered a slight 0.1  per cent increase. 

Meanwhile, Energy, Resources & Utilities, and Manufacturing sectors posted more substantial growth, with 7  per cent and 5.3  per cent YoY gains, respectively. However, the Communication & Media sector saw a steep decline of 10.3  per cent, and the Technology and Services domain also fell by 1.9  per cent.

Geographically, TCS experienced robust growth across several key regions. The Indian market, in particular, saw exceptional growth, increasing by 95.2  per cent YoY in constant currency terms. Other regions also performed well, with the Middle East & Africa growing 7.9  per cent, Asia Pacific rising 7.5  per cent, Latin America gaining 6.8  per cent, and the UK increasing by 4.6  per cent. However, the North American market grew at a more modest 2.1  per cent.

At the end of Q2, TCS’ workforce stood at 6,12,724 employees, with 5,726 new additions during the quarter. The company reported a 12.3  per cent IT services attrition rate over the past twelve months. In the first half of FY25, TCS added more than 11,000 employees and has already begun its campus recruitment for FY26, signalling its commitment to strengthening its talent pool for future projects.