TCS experienced its first year-on-year decline in constant currency since the September quarter of FY21, with the poor performance attributed to weak macroeconomic conditions, cautious client sentiment, delayed decision-making, and the closure of the BSNL deal. Its revenue in the June quarter fell 3.1% year-on -ear in constant currency and 3.3% sequentially, as geopolitical uncertainties dampened demand.
Key Highlights
- TCS reported a 3.1% constant‑currency revenue decline in Q1 FY26, marking its first drop since FY21.
- Net profit rose approximately 6% to ₹12,760 crore, supported by cost controls and a one‑time gain.
TCS CEO K Krithivasan stated, "The sequential degrowth was -3.3%." The remaining -2.8% is due to the winding down of the BSNL deal, with international revenue accounting for -0.5%. From an outlook standpoint, we remain confident and optimistic that international revenue in FY26 will exceed FY25 revenue overall. It is too early to predict when growth will resume, as much depends on increased clarity in the macroeconomic environment. However, with trade talks nearing completion and the new bill in the United States having received presidential approval, we anticipate things becoming clearer by late July or early August."
The operating margin fell slightly to 24.5% from 24.7% a year ago. It did, however, rise 30 basis points sequentially. "And the tailwinds came in from a reduction in third-party expenses," stated its CFO, Samir Seksaria. North America, its mainstay market, saw a 2.2% year-on-year decline in constant currency, while India saw a sharp 21.7% drop, owing primarily to the winding down of the BSNL deal. The UK revenue fell by 1.3%, while Continental Europe fell by 3.1%.
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Krithivasan stated that international revenue decreased by 0.5% due to a variety of factors. One major issue was that clients with approved projects were halting or delaying them because the expected return on investment (ROI) was no longer immediate. The ROI threshold has risen, putting more projects on hold. "In some cases, decisions that we expected to be made this quarter—so that transformation projects could begin—have been delayed because clients are unsure about the return on investment for those projects." So, the overall reasons for project delays or pauses remain very similar. However, as you can see, there was only minor-very small growth in North America, while the UK and Europe experienced degrowth," he said.
When asked about the reasons for the bearish commentary and demand contraction, Krithivasan stated that tariffs have a greater impact on consumer industries.
