Tata Consultancy Services (TCS), India’s largest IT services company, has reported its first year-on-year (YoY) revenue decline since FY21. TCS Q1 results have raised some eyebrows as the company has been a consistent performer for years. Let’s dive into the numbers and see what led to this drop, how TCS plans to move forward, and what this could mean for investors.
What Led to the Revenue Drop?
In the June quarter (Q1 FY26), TCS posted a 3.1% decline in revenue on a constant currency basis. The main reasons for the dip include weaker global demand due to geopolitical tensions and the winding down of a significant deal with BSNL. TCS’s total revenue for Q1 stood at ₹63,437 crore, which was a 1.3% increase compared to ₹62,613 crore in the same period last year, but the constant currency figures tell a different story.
Also read: Vedanta Shares Drop After Viceroy Research Allegations
Revenue breakdown:
| Region | Q1 FY26 Revenue (₹ Cr) | YoY Growth/Decline | Constant Currency Decline |
| India | 9,301 | -21.7% | – |
| North America | 28,400 | -2.2% | – |
| UK | 5,200 | -1.3% | – |
| Continental Europe | 4,500 | -3.1% | – |
| Total | 63,437 | 1.3% | -3.1% |
While the company experienced a small growth in revenue in terms of local currency, it struggled in its major markets, especially in India. India’s revenue witnessed a sharp 21.7% drop. North America, the UK, and Continental Europe also reported declines, but at a smaller scale: 2.2%, 1.3%, and 3.1%, respectively. TCS CEO, K. Krithivasan, pointed out that the company’s key market in India was hit hard by the ramp-down of the BSNL deal, which contributed heavily to the revenue contraction.
How did TCS manage to beat profit expectations?
Despite the revenue drop, TCS’s net profit rose by 6% year-on-year, amounting to ₹12,760 crore. The company reduced third-party expenses, which helped improve its operating margin, which slightly slipped to 24.5% from 24.7% a year earlier. The company also benefited from higher non-operational income, which helped in boosting the overall net profit.
Profit and margin:
| Metric | Q1 FY26 | Q1 FY25 | YoY Growth |
| Net Profit (₹ Cr) | 12,760 | 12,040 | +6% |
| Operating Margin | 24.5% | 24.7% | -0.2% |
| Revenue (₹ Cr) | 63,437 | 62,613 | +1.3% |
CEO K.Krithivasan also mentioned that TCS managed to close deals worth USD 9.4 billion during Q1, which bodes well for future revenue growth. However, the impact of these deals has not yet been fully realised, which means it may take some time for these wins to reflect in the company’s numbers.
Also read: BSE, Capital Market Stocks Tank as SEBI Mulls New Leverage Rules
What about the Future Outlook?
Looking ahead, TCS’s outlook remains optimistic, despite the short-term challenges. The CEO mentioned that international revenue in FY26 is expected to surpass FY25, but growth is dependent on the overall macroeconomic situation, which continues to be unpredictable. While there is confidence that demand will pick up in the second half of FY26, it is hard to say when exactly the revenue will start picking up again.
For now, TCS is waiting for greater clarity in global trade discussions and a new bill in the US that has been signed into law. They expect things to clear up by late July or early August.
The Impact on the Stock Market
TCS’s quarterly results sent its stock down by about 2% in early trade following the earnings release. This marked its fifth consecutive session of losses, which is concerning for investors. Over the past month, TCS’s stock has fallen nearly 5%. The decline can be attributed to the disappointing Q1 revenue figures and the fact that the company’s key growth markets are facing issues like delayed project decisions and cautious client sentiment.
Stock Performance:
| Stock Performance | Current Price (₹) | Change (5 Days) | Change (1 Month) | Change (6 Months) |
| TCS Stock Price | 3,320.20 | -2.74% | -4.37% | -22.63% |
Additionally, the IT sector overall seems to be struggling. Other tech stocks, such as Infosys, Wipro, and HCL Technologies, also experienced a dip in share prices following the announcement of TCS Q1 results.
You may also like: PC Jeweller Share Price Jumps 17% After Strong Q1 FY26 Results
Key takeaways
- TCS reported its first YoY revenue decline in constant currency terms since FY21, mainly due to the winding down of the BSNL deal and global economic uncertainties.
- Despite the revenue dip, the company managed to achieve a 6% rise in net profit, thanks to reduced third-party expenses and strong deal wins.
- The company’s international revenue showed a slight decline, and markets like India, North America, the UK, and Europe all faced challenges.
- TCS’s future outlook depends on a clearer macroeconomic picture, with expectations for growth in FY26.
- TCS’s stock saw a dip following the results, reflecting the overall pressure on large-cap IT stocks.
Conclusion
TCS’s Q1 results present a mixed bag. While the company managed to maintain profitability despite the challenges, its revenue growth took a hit, especially due to issues in its key markets. However, with significant new deals in the pipeline and an optimistic outlook for the second half of FY26, the company seems poised for recovery once global conditions stabilize.
