Tata Consultancy Services - How are the Q3 results?

Welcome to the results season when companies will report their performance in the third quarter of the financial year 2023. The season starts today with India's second largest company, Tata Consultancy Services (TCS) reporting its Q3 results.

TCS logo

About the company

• TCS is a very important part (basically the heart) of Tata group and their biggest cash cow. They are an IT services company who provide consulting and business solutions to clients. They are the biggest IT company of India with a massive market capitalization of Rs. 1,214,617 crores.

Q3FY23 results

Tata consultancy services (TCS) reported its earnings today for the third quarter of 2023. The major highlights from the results are as follows :-

• Revenue for the quarter came at Rs. 58,229 crore (growing by 19.1% year on year)

• Net income (Profit after tax) for the quarter came out at Rs. 10,846 crore (growing by 11% year on year)

• Order book of the company stood at $7.8 billion

• Regions like North America and UK led growth for the company

• Net margins for the quarter stood at 18.6% while operating margins were at 24.5% (contracted 0.5% year on year)

• Attrition has started to cool down, came at 21.3% for this quarter

• A big dividend of Rs 75 per share has been announced by the board

Q3FY23

Q3FY23 results analysis

• Revenue for the quarter was expected to come around Rs. 57,500 crores. TCS reported revenue slightly higher than that around Rs. 58,229 crore. Almost inline with expectations.

• Operating margins in the quarter were expected to be reported near 27.5%. TCS reported operating margins way lower than that. They came out just 24.5% thus underperforming expectation by a huge margin. Very poor performance from the company in here.

• Net profit for the quarter was expected to come around Rs. 11,300 crores. TCS reported net profit slightly lower than that around Rs. 10,846 crore. A slight underperformance from the company when compared to expectations.

Management commentary

• According to Mr. Rajesh Gopinathan, Chief executive officer (CEO) and Managing Director (MD) of Tata Consultancy Services (TCS), growth in the third quarter of financial year 2023 was driven by cloud services. There were some gains in the market share through momentum in UK, North America markets and vendor consolidation.

• According to Mr. Samir Seksaria, Chief financial officer (CFO) of Tata Consultancy Services (TCS), Operating margins were helped by currency support, less challenges on the supply side and improved productivity. 

Personal view

• TCS Q3FY23 results for me are not good. They lie between inline and very bad in my opinion. They could have done better. Yes, the revenue was slightly higher than expectations (if not inline) but both margins and net profit underperformed. The underperformance in operating margins was huge which is a big negative for the company and investors. Q3 is a seasonally weak quarter for IT companies but the expectations were derived keeping that in mind. Lets see how the market reacts tomorrow on these results. What do you think?

Technical Analysis

Weekly chart of TCS

So, what do you think about TCS results?

Do you hold or track the company? 

Let us know in the comments below!

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