By Reuters | Updated: 12 October 2023
BENGALURU, Oct 12 (Reuters) – Shares of India’s Tata Consultancy Services (TCS.NS) fell as much as 1.8% on Thursday, as investors worried that a recovery in demand was still not within reach after second-quarter revenue missed estimates due to weak client spending.
The poor results and commentary from India’s largest IT services provider took the shine off TCS’ $2 billion share buyback announcement, and also slammed shares of peers.
The Nifty IT index (.NIFTY) dropped 1% on Thursday, with Infosys (INFY.NS) and HCLTech (HCLT.NS) – both scheduled to report results later in the day – falling about 1% each.
TCS’ revenue rose 7.9% to 596.92 billion rupees ($7.18 billion) in the September quarter, it said after market hours on Wednesday, but fell short of the analysts’ estimates of 602.44 billion rupees.
“Broad-based revenue weakness and sharp headcount decline in the second quarter along with muted hiring outlook suggest that demand recovery is not yet in sight,” Jefferies analysts wrote in a note, cutting their fiscal 2024 revenue growth forecast by 70 basis points to 4.3%.
The Nifty IT index (.NIFTY) dropped 1% on Thursday, with Infosys (INFY.NS) and HCLTech (HCLT.NS) – both scheduled to report results later in the day – falling about 1% each.
TCS’ revenue rose 7.9% to 596.92 billion rupees ($7.18 billion) in the September quarter, it said after market hours on Wednesday, but fell short of the analysts’ estimates of 602.44 billion rupees.
“Broad-based revenue weakness and sharp headcount decline in the second quarter along with muted hiring outlook suggest that demand recovery is not yet in sight,” Jefferies analysts wrote in a note, cutting their fiscal 2024 revenue growth forecast by 70 basis points to 4.3%.
In the post-earnings press conference, TCS also hinted that there was no clear picture of when discretionary spends will return.
The company’s results set the tone for a $245 billion-industry that is staring at an uncertain demand environment in the key U.S. and European markets, amid inflationary pressures and high interest rates.
TCS shares are currently down 1.5%, bringing year-to-date gains to 11.4%, compared with the IT index’s 13% rise this year.
© Thomson Reuters 2023
