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TCS in Q1 reported revenue of US$7,624 mn flat QoQ

ICICIdirect Research 10 Jul 2026 DISCLAIMER

News: TCS in Q1 reported revenue of US$7,624 mn flat QoQ/ 2.7% YoY and ₹72,275 crore, up 2.2% QoQ / 13.9% YoY (in CC terms +0.4% QoQ /+3.2% YoY). Annualized AI services revenue was US$2.6 bn in Q1, up 13.6% QoQ (implying 8.5% of revenue mix). Geography wise on YoY CC basis growth was led by India (6.2% of the mix), MEA (2.5% of the mix), Continental Europe (15.4% of the mix), APAC (8.4% of the mix) and North America (48.3% of the mix) which grew by 22.9%, 7.6%, 4.3%, 2.5% and 2% respectively while Latin America (2% of the mix) and UK (17.2% of the mix) declined by 2.1% and 0.6%. Vertical wise in YoY CC terms growth was driven by Regional Markets & Others (13.3% of the mix), ER&U (6.3% of the mix), Tech & Services (8.5% of the mix), Life Sciences & Healthcare (10.3% of the mix), Manufacturing (8.7% of the mix), BFSI (32.1% of the mix) and Communication & Media (5.8% of the mix) which grew by 9%, 6.9%, 3.5%, 3.5%, 2.9%, 2.4% and 1.4% respectively, while Consumer Business (15% of the mix) declined by 1.2%. EBIT margin stood at 24%, down ~130 bps QoQ, primarily due to wage hike impact (-170 bps) which was partially offset by currency tailwinds and operational efficiencies (+40 bps). PAT for the quarter (before exceptional items of ₹668 crore w.r.t settlement of legal claim) came in at ₹13,849 crore, up 1% QoQ/8.5% YoY while PAT (after exceptional item) stood at ₹13,349 crore, down 2.7% QoQ/ up 4.6% YoY. The company recorded TCV of US9.5 bn (-21% QoQ/ +1% YoY), including a marquee US$800mn AI-led transformation mega deal with SKF. The company added 9,279 employees (highest in 15 quarters) in Q1 taking total headcount to 5,93,798 while the LTM attrition stood at 13.6%, down 10 bps QoQ. declared an interim dividend of ₹12 per share

View: TCS reported a muted Q1 with flat revenues in constant currency and operating margin decline due to annual wage hikes. The US$9.5 bn TCV, despite moderating sequentially, reflects continued large deal activity led by the US$800 mn SKF AI-led transformation contract, indicating that enterprise spending on AI, modernization and platform transformation remains intact. AI annualized revenue increased to US$2.6 bn, while strategic partnerships with Anthropic and Mistral further strengthen the company's AI capabilities. Management also indicated that AI-led productivity gains of ~ 10–15% are increasingly being passed on to clients, although incremental transformation opportunities are helping offset revenue deflation. However, discretionary spending continues to remain uneven across sectors, with Consumer Business still under pressure amid geopolitical uncertainties, while management expects Manufacturing and Life Sciences to recover gradually Q2 onwards. On the margins front, management reiterated its intent to restore margins to 25%+ in this FY through operational efficiencies, though the pace of recovery will remain dependent on demand normalization and continued investments in AI capabilities. Overall, the quarter reflects stable execution with encouraging AI traction, although a broad-based demand recovery is yet to fully materialize for us to remain constructive on the stock.

Impact: Neutral

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