India's TCS Q3 revenue tops estimates as UK outshines North America

FILE PHOTO: Figurines with computers and smartphones are seen in front of Tata Consultanct Services logo in this illustration, July 24, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

By Sai Ishwarbharath B

BENGALURU (Reuters) -India’s top software-services exporter Tata Consultancy Services reported a better-than-expected rise in third-quarter revenue on Thursday, helped by the strong performance in the U.K.

The results come months after the Tata company won large deals in the region, including a $1.9 billion contract with the National Employment Saving Trust and another $1 billion deal with group firm Jaguar Land Rover.

“UK has improved because some of the mega deals they had won last year were based in this region,” said Ruchi Burde Mukhija, analyst at Elara Capital, adding that these deals may have started “firing.”

Consolidated revenue grew 4% to 605.83 billion rupees ($7.30 billion) in the three months to Dec. 31, beating analysts’ average estimate of 601.47 billion rupees, according to LSEG data.

Revenue grew 8.1% in the U.K. market, but fell 3% in North America, due to extended furloughs and clients cutting discretionary spending amid macroeconomic challenges.

Consolidated profit rose 2% to 110.58 billion rupees, including an impairment charge of 9.58 billion rupees related to a trade-secrets lawsuit filed by Epic Systems.

Meanwhile second-ranked Infosys missed third-quarter profit estimates. Smaller rivals Wipro and HCLTech are set to report their earnings on Friday.

“The pain will not go away as the model needs to shift from labour arbitrage to technology arbitrage,” said Phil Fersht, the CEO at tech advisory firm HFS Research.

“We are going through a genuine inflection point in the IT services industry after 25 years of double-digit (revenue) growth.”

TCS secured deals worth $8.10 billion in the quarter, down from $11.2 billion in July-September. The industry leader had secured deals exceeding $10 billion in each of the three preceding quarters.

Banking and financial services, constituting 37% of revenue, contracted 3% in the latest quarter.

($1 = 83.0100 Indian rupees)

(Reporting by Sai Ishwarbharath B, Varun Vyas, and Haripriya Suresh in Bengaluru; Editing by Dhanya Ann Thoppil)