On 2 April, US President Donald Trump imposed several tariffs on imports of several countries, triggering concerns of tariff war worldwide. The analysts are worried that the world is on the verge of a recession.
Any recession is bad news for IT service companies because when Fortune 500 companies hold their expenses back, the revenue of Indian IT outsourcers takes a hit. The effect has done shareholders on their heel.
TCS shares, which fell 13.4% from 1 January to 1 April to 7.23% from April 2 to April 8. It translates a decline of 20.6% since the beginning of the year.
In his 57 years, TCS’s fifth Chief Executive Officer Kunchitham Krithivasan faces his biggest test – managing more than 600,000 employees at the time of macroeconomic uncertainty. One side of Genai presents an existence dilemma for the country’s $ 283 billion IT industry, already a full plate of macroeconomic uncertainty, in addition to a whole plate, a meal that will be difficult to digest the experience of TCS.
The Mumbai-based company Client may face a third related challenge as a ramp-down, which has taken shape in the previous financial year.
It will not be easy for Krithivasan to run a Bhamth like TCS, which is about 30 billion dollars per year, or about $ 82 million per day. against this backdrop, Mint The fourth quarter of TCS puts the spotlight on five important things to determine on April 10 in the fourth quarter earnings.
1. Demand Outlook
The first and most important concern for the country’s largest IT outsource is an indefinite macroeconomic environment. While tariffs and counter-tariffs are not expected to directly affect the IT outsourcers, customers, including the world’s largest companies, are expected to pull back their technical expenses, which may lead to less demand for IT services and in turn, lower revenue for TCS. More than 90% of the company’s revenue comes from customers abroad.
Such situations may lead to a silent demand outlook by Krithivasan on Thursday. While TCS does not guide the revenue, its approach on global demand for technical services paves the way to other IT outsources, which will declare their full year’s income later in the month.
2. Revenue growth
TCS, which ends FY24 with $ 29.1 billion in revenue, is facing recession blues. Its revenue increased by 4.1% year-on-year, the slowest speed in three years. Revenue increased by 4.6%in the first nine months of FY 25 (April-December 2024). The client does not give much reason to please the pressure connected to internal challenges like ramp-down.
“In FY2025E, the TCS has faced challenges due to the planned ramp-down and unexpected changes in the sourcing strategy by the customers,” Kawaljit Saluja, Sathishkumar S and Vamashi Krishna, analysts of Kotak Institutional Equity, said in a note on 27 March.
This year, TCS is expected to lose a business of $ 440 million from at least three customers – PostBank Systems AG, Media Rating Firm Nielseniak, and Life Insurance Company Transamerica Life Insurance Company Peer Wipro Limited, recently a big deal with the big accounts of TCS, one of the big accounts of TCS. This has inspired analysts to question the TCS deal execution.
“TCS is known to protect its wallet shares thoroughly, but a large contestant may have a visual a dip in an execution skill to establish a strategic account and focus in the upcoming results,” said Kotak analysts.
Given that TCS does not guide the revenue, analysts may indicate the company’s possibilities.
3. Profitability
The TCS operating margin will be an important metric as the company may postpone the salary hike, or reduce them, if the demand for business is low and less money flows in the company’s coffeers.
TCS always follows a streamlined cycle where its profitability is at the end of the financial year. The reason for this is that TCS is the only prominent IT outsourcers that gives salary hikes at the beginning of fiscal. Most of the effects of salary hike are absorbed from April to September in the first six months of fiscal.
The 24.5%TCS operating margin Infosys Limited, HCL Technologies Limited and Wipro are the highest among its colleagues, which ended three months through December 2024 with operating margin of 21.3%, 19.5%and 17.5%respectively.
4. Plan to hire
The low demand for IT services reduces the needs of employees, whether it is complexes or later. Add Jenai-LED automation to the mix and it can be a double whami for the company’s plans to connect the headcon.
The forecast of the fresher hiring plan for the year can be given by the company’s top brass during the announcement of earnings. TCS added 5,808 employees in the first nine months of 2024, the highest among the top five in the country after the second largest Infosys, including 6,189 employees.
Considering its size in terms of employees, the company’s hiring requirements are more than their peers. Tech services company had planned to appoint 40,000 freshers by March 2025.
5. Jean
Genai threatened to eat in the work of IT outsourced as new technology can automate human functions, reduce dependence on humans for certain types of work.
TCS does not call revenue through new technology, but Chairman Chandrashekaran has asked its generals to a Jeeni component in all their deals. Analysts and Doomers have stated that Jenai is working on customer aid, application development and maintenance, businesses, which make about 40% of the company’s revenue.
This means that the business of $ 11.6 billion TCS is in danger from Jeanai as customers will seek low renewal rates for contracts as less people will be billed due to benefits from automation.