TCS Q1 Results: Net profit jumps 6% on-yr to Rs 12,760 cr, beats estimate; Rs 11 per share dividend declared

Mumbai, July 10, 2025 — Tata Consultancy Services (TCS), India’s largest IT services exporter, kicked off the earnings season on a robust note, reporting a 6% year-on-year (YoY) increase in consolidated net profit at ₹12,760 crore for the quarter ended June 30, 2025 (Q1FY26). The performance beat street estimates, supported by strong demand in key markets and operational efficiencies. The company also declared an interim dividend of ₹11 per share, underlining its commitment to shareholder returns.

Strong Operational Performance Despite Global Challenges

TCS reported a revenue of ₹64,600 crore, up 5.4% YoY, with constant currency (CC) revenue growth at 4.8%. The company’s operating margin expanded 60 basis points (bps) sequentially to 24.6%, attributed to improved resource utilization and better cost controls.

“We are pleased with our strong start to FY26,” said K. Krithivasan, CEO and MD of TCS. “Our focus on delivering business transformation at scale, while driving productivity through AI and automation, is resonating well with clients globally. We see a gradual recovery in discretionary tech spending, especially in the US.”

Geographical and Vertical Highlights

• North America, the company’s largest market, showed moderate growth at 3.1% YoY in constant currency terms.

• UK and Continental Europe saw a recovery of 4.5% and 5.2% YoY respectively.

• The BFSI segment, traditionally TCS’s largest vertical, posted a growth of 2.9%, showing signs of revival after a few muted quarters.

• Life sciences and healthcare, along with retail and CPG, emerged as strong performers, growing 8.1% and 6.4% respectively.

Hiring and Attrition Trends Normalize

The company reported a net headcount addition of 3,400 employees, bringing its total workforce to 629,200. Attrition on a last twelve-month (LTM) basis fell to 12.1%, continuing its downward trend. TCS stated it remains focused on fresher hiring, internal upskilling, and AI-led workforce productivity enhancements.

Chief HR Officer Milind Lakkad commented, “We continue to attract and retain the best talent, thanks to our strong brand and career growth opportunities. We’ve also doubled down on upskilling employees in GenAI, cloud, and cybersecurity.”

Analyst Views: Margins in Focus

Analysts lauded TCS’s margin recovery and revenue beat. According to Ruchit Mehta, Fund Manager at SBI Mutual Fund, “TCS’s performance indicates underlying demand resilience. The improvement in operating margin, especially in a seasonally weak quarter, is noteworthy. Going forward, the focus will be on whether deal ramp-ups translate into stronger topline momentum.”

Jefferies India noted in a client report that TCS’s Q1 beat was driven by strong execution and modest recovery in discretionary spends. “We expect margins to improve further in FY26 as pricing, pyramid rationalization, and GenAI adoption kick in.”

Dividend and Capital Return Strategy

The Board of Directors declared an interim dividend of ₹11 per equity share, with the record date set for July 20, 2025. TCS remains among the top Indian companies in terms of shareholder payouts, consistently maintaining a high dividend payout ratio and executing periodic buybacks.

“TCS’s cash reserves and strong cash flow generation give it ample headroom to return value to shareholders,” said Abhay Agarwal, founder of Piper Serica. “Its capital allocation discipline remains best-in-class.”

Market Reaction and Outlook

TCS shares closed up 2.3% at ₹3,970 on the NSE following the earnings announcement, outperforming the broader Nifty IT index, which rose 1.1%.

Looking ahead, TCS maintains a cautiously optimistic outlook. With large deal wins totaling $10.4 billion during the quarter, the company’s order book remains healthy. However, management flagged macroeconomic uncertainties, including inflationary pressures in Europe and delayed tech budgets in some verticals.

TCS’s focus areas include:

• Scaling GenAI-led services

• Expanding cloud transformation mandates

• Building localized delivery centers in key geographies

Investor Takeaway

For investors, TCS’s Q1 results reaffirm the company’s resilience and strategic agility amid an evolving IT demand landscape. The improved margins, stable deal flow, and attractive dividend yield make the stock a long-term favorite among institutional and retail investors alike.

“TCS continues to be a core holding in our portfolio,” said Neelkanth Mishra, CIO at Axis Mutual Fund. “It’s uniquely positioned to benefit from both cost take-out and digital transformation spends, especially as AI-led projects gain traction.”