Tata Consultancy Services : Q4 2024-25

Tata Consultancy Services Earnings Conference Call

April 10, 2025, 19:00hrs IST (08:30hrs US ET)

Tata Consultancy Services Limited

Q4 & Year Ended 31st March 2025 Earnings Conference Call

April 10, 2025, 19:00 hrs IST (08:30 hrs US ET)

Moderator:	Ladies and gentlemen, good day, and welcome to the TCS Earnings
	Conference Call. As a reminder, all participant lines will be in the listen-only
	mode and there will be an opportunity for you to ask questions after the
	presentation concludes. Should you need assistance during the conference
	call, please signal an operator by pressing star then zero on your touchtone
	phone. Please note that this conference is being recorded.
	I now hand the conference over to Ms. Nehal Shah from the Investor
	Relations team at TCS. Thank you, and over to you.
Nehal Shah:	Thank you, operator. Good evening, and welcome, everyone. Thank you for
	joining us today to discuss TCS' financial results for the fourth quarter and full
	year FY 2025 that ended March 31, 2025. This call is being webcast through
	our website and an archive, including the transcript, will be available on the site
	for the duration of this quarter. The financial statements, quarterly fact sheet
	and press releases are also available on our website. Our leadership team is
	present on this call to discuss our results.
	We have with us today Mr. K Krithivasan, Chief Executive Officer and
	Managing Director.
K Krithivasan:	Hi, good evening.
Nehal Shah:	Mr. Samir Seksaria, Chief Financial Officer.
Samir Seksaria:	Hello, everyone.
Nehal Shah:	And Mr. Milind Lakkad, Chief HR Officer.
Milind Lakkad:	Hi, everyone.
Nehal Shah:	Our management team will give a brief overview of the company's
	performance, followed by a Q&A session. As you are aware, we don't provide

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Tata Consultancy Services Earnings Conference Call

April 10, 2025, 19:00hrs IST (08:30hrs US ET)

specific revenue or earnings guidance. And anything said on this call, which reflects our outlook for the future, or which could be construed as a forward- looking statement, must be reviewed in conjunction with the risks that the company faces. We have outlined this risk in the second slide of the quarterly fact sheet available on our website and email out to those who have subscribed to our mailing list.

With that, I would like to turn the call over to Krithi.

K Krithivasan: Thank you, Nehal. Good day, everyone. I'm pleased to announce that we are concluding FY '25 by surpassing the $30 billion revenue milestone. We have achieved this while maintaining industry-leading margins, exceptional return ratios and a strong balance sheet. It is very gratifying to see that most of our leadership team has been part of TCS' extraordinary journey, growing 14 times in the last two decades. We extend our heartfelt gratitude to all our current and former employees, partners, customers and other stakeholders who have supported us over the past 57 years.

Our financial year 2025 revenue grew by 4.2% in constant currency. Our operating margin for the year came in at 24.3%. Our net margin was at 19%.

Coming to our more recent performance, our Q4 revenues grew 2.5% on a constant currency basis. All major markets grew sequentially. Our record Q4 TCV of $12.2 billion demonstrates our ability to gain market share. North America TCV reached an all-time high of $6.8 billion. BFSI TCV was $4 billion, and Consumer Business Group contributed $1.7 billion. This impressive performance stands out in the absence of mega deals.

I'll now invite Samir and Milind to go over different aspects of our performance during the quarter. I'll step in later to provide more color on the demand trends we are seeing in our business. Over to you, Samir.

Samir Seksaria: Thank you, Krithi. Good day, everyone.

I will start with the full year's numbers and then proceed to the quarterly commentary. For the full year, our revenue was $30.2 billion, a year-on-year

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Tata Consultancy Services Earnings Conference Call

April 10, 2025, 19:00hrs IST (08:30hrs US ET)

growth of 4.2% in constant currency. The revenue growth is 3.8% in dollar terms and 6% in rupee terms.

Our FY '25 operating margin was at 24.3%, a decline of 30 basis points over the prior year. During the year, we had a 200-basispoint headwind resulting from annual wage increases and other tactical interventions for our associates such as promotions. These merit-based interventions were part of our ongoing efforts to invest in our people and ensure their growth and satisfaction within the company. We had a further 130 basis points headwind from continuing investments in infrastructure and capability building. To mitigate these headwinds, we focused on improving utilization, productivity and realization. Additionally, we received an 80-basispoint support from the currency.

Net margins for FY '25 were 19% and our EPS grew 5.1% year-on-year.

Our effective tax rate for the year was 25.3%.

The Board has recommended a final dividend of ₹30 per share, bringing our total dividend for the year to ₹126 per share.

Coming to Q4, for the quarter ending 31st March '25, our revenue increased by 2.5% year-on-year in constant currency terms, reaching ₹64,479, that translates to a growth of 5.3% in rupee terms and our dollar revenues were at

7.47 billion, Y-o-Y growth of 1.4%. Our Q4 operating margin stood at 24.2%, reflecting a sequential decline of 30 basis points.

During the quarter, we incurred 100 basis points headwind due to tactical interventions. Additionally, we incurred a further 60 basis points headwind from strategy marketing and purpose-driven initiatives. We managed to mitigate some of these headwinds by improving our operating leverage and optimizing our revenue mix. Furthermore, currency movements provided 40- basis point support.

Net margins in Q4 were 19%. Our accounts receivable stood at 71 days DSO in dollar terms for Q4 and were down three days sequentially. Our cash conversion this quarter continues to be strong. Net cash from operations was

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Tata Consultancy Services Earnings Conference Call

April 10, 2025, 19:00hrs IST (08:30hrs US ET)

$1.78 billion, which is 125% of net income. Free cash flows were $1.48 billion, and funds invested at the end of the period stood at $5.53 billion.

Let me walk you through our segmental performance. Note that all growth numbers are on a year-on-year basis in constant currency, unless mentioned. In Q4, BFSI grew 2.5% while the consumer business group declined 0.2%. Life Sciences & Healthcare declined 5.6%; Manufacturing declined 2.9%; whereas Technology & Services grew 1.1%; Communication & Media declined 9.8%; ERU, which is Energy Resources & Utilities grew 4.6%; and Regional Markets grew 22.5%.

Moving on to geography. Amongst major markets, Europe grew 1.4%, U.K. grew 1.2%, whereas North America declined 1.9%. All growth markets continued their strong performance this quarter also. Middle East and Africa grew 13.2%, LatAm grew 4.3% and Asia Pacific grew 6.4%, while India had a growth of 33%.

I'm now going to talk about a few of our industry-leading portfolio of production platforms. Our expanding suite is doing well in the marketplace.

• ignioTM, our cognitive automation software suite saw 30 new deal wins and 11 go-lives.

1. ignioTM has introduced Code Accelerator and advanced GenAI powered tool designed to automate code generation and transformation, significantly reducing time to value for customers. This feature has already been deployed across more than 80% of our SaaS customers, boosting productivity by 150%. Code Accelerator has played a key role in driving faster product adoption by delivering first-time right use cases. Additionally, ignioTM is leveraging GenAI capabilities to expedite the migration of its on-premises customers to SaaS, by seamlessly transforming their code to be compatible with the latest platform, making them future ready.

• TCS BaNCSTM, our flagship product for financial services, continued its leadership with 4 wins and 4 go-lives during the quarter.

1. The primary drivers for core transformation in the banking sector, driving strong demand for our products, include data harmonization, real-time analytics, compliance and monitoring and unified customer experience.

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Tata Consultancy Services Earnings Conference Call

April 10, 2025, 19:00hrs IST (08:30hrs US ET)

1. Banks and credit unions worldwide are increasingly adopting public cloud technologies, which offer cost efficiencies, AI tools, zero trust architecture and robust security. The shift to cloud native technologies and micro services architecture is facilitating easier migration and enhancing legacy systems.

• TCS BFSI production platform saw 3 wins and 3 go-lives during the quarter.
• TCS QuartzTM, our innovation-led platform, leveraging blockchain and AI had 2 wins and 1 go-live this quarter.
• TCS iONTM, our platform for digital assessment, digital marking, exam administration and learning hub, had 35 new wins and took 75-plusplatform

capabilities live.

1. Our assessment platform administered in-center exams for over 21 million candidates and remote assessments for more than 82,000 candidates.

1. State governments in India are investing in building digital platforms for skill

development to ensure inclusivity of the youth in the last mile and allocating annual budgets for youth skilling linked with employability.

1. Moreover, universities in India are looking for end-to-end automation platforms to make their online degree programs, user-friendly and scalable. These key trends should drive growth for the iON platform.

• TCS OmniStoreTM, our AI-powered Universal commerce suite, had 2 deal

wins and 3 go-lives during the quarter.

1. A leading American healthcare company selected TCS AI-powered unified commerce platform, OmniStoreTM to modernize customer journeys. TCS has deployed the end-to-end next-gen omnichannel point-of-sale solutions in 25 stores across four states as part of a planned nationwide rollout across more than 9,000 locations. Composable architecture with distributed cloud and edge ensures full resiliency while maintaining centralized control and monitoring. The intuitive user interface leverages Vision AI and interactive display, enabling personalized and gamified checkout experiences and training fee transactions. The self-filling solution, which integrates seamlessly with legacy hardware ensures seamless uninterrupted service, greater agility and speed to market. This will significantly improve operational efficiency and compliance, reduce checkout times by over 20%, revenue in line the colleague and customer engagement and enable innovation at checkout.

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Tata Consultancy Services Earnings Conference Call

April 10, 2025, 19:00hrs IST (08:30hrs US ET)

• TCS OptumeraTM, our AI-powered retail merchandising suite, had 1 win and went live for 1 client.
• TCS TwinXTM, our digital twin solution had 3 wins and 1 go live. In Life Sciences
• TCS ADDTM platform continues to win an increased focus on leveraging AI in the life sciences industry.

1. Pharma companies are especially investing in AI to use cases to improve trial productivity to enhance diagnosis of diseases and informed decision-making, reduced time for research -- and for drug research and development and to

design personalized treatments.

1. TCS ADDTM is actively working within GenAI PoC across literature search and insights, patient insights, safety case processing and medical monitoring. Our offerings continue to enable digital ecosystem for patient-centric clinical trials, leveraging AI for data flow across the clinical value chain.

• TCS HOBSTM are suited for products for communication service providers at 3 wins and 1 go live this quarter.
• MasterCraftTM and JileTM had 27 deal wins in Q4.
  Coming to Client metrics, our transformational work for customers is expanding our share of our wallets and leading to broader and deeper engagements. In FY '25, we had 64 clients in the 100 million-plus revenue band, an increase of two over the previous year.
  With that, I'll hand it over now to Milind.

Milind Lakkad: Thank you, Samir. Good day, everyone. Our workforce at the end of FY '25 was 607,979. We continue to enjoy pride of place as the employer of choice by prioritizing a culture of professional and personal growth, well-being and purpose-driven engagement. Over LTM attrition was stable at 13.3%.

During the year, we strengthened our current pipeline through strategic investment in scale development. Our campus hiring program is progressing as planned, and we are gearing up to onboard an increased number of

campus hires in FY '26.

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Tata Consultancy Services Earnings Conference Call

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Our investments in organic talent development are yielding phenomenal learning outcomes. As a leader in both 'Skilling for AI' and 'Skilling with AI,' TCS offers a robust ecosystem of learning, including role-specific courses, cloud-based lab environments, learning zones with hyperscalers and gamified hackathons. We have established a scale training ecosystem, including the AI experience zone, Fresco playgrounds and AI Symposium.

TCS is ranked number 1 in AI and data certifications across three Hyperscalers and GitHub. The use of TCS' own AI GenAI tool by employees ramping up with GenAI coaches, tutors, simulations, algorithms, etcetera. The associates have locked 56 million learning hours and acquired 5.2 million competencies in FY '25.

We achieved a significant milestone this quarter by adding our first ever enterprise-wide top employer certification from the Top Employer Institute. This milestone builds on TCS' achievement as a global top employer for 2025, making an unbroken record of receiving this distinction over a decade. We have recently been ranked by LinkedIn as a Top company to work for in India, assuming this recognition for the fifth year in a row.

I will now request Krithi to speak on the various demand driver during the quarter.

K Krithivasan: Thank you, Milind. I'm pleased with the performance this quarter in a challenging global macroeconomic environment. All major markets grew sequentially, and we are proud to successfully deliver a nation-building transformation engagement in our growth market. We also saw a second consecutive quarter of very strong TCV, which consisted of a good mix of large, medium and small deals, which augurs well for future revenue visibility.

We are seeing TCV improvement across markets as clients prioritize initiatives around technology modernization, cost optimization, vendor consolidation, operational model transformation risk and compliance. We have all been witnessing an increased level of uncertainty in the global economic and geopolitical landscape in the last few weeks, making a shift from our commentary in January.

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Tata Consultancy Services Earnings Conference Call

April 10, 2025, 19:00hrs IST (08:30hrs US ET)

We have seen instances of delays in decision-making and discretionary spending has come under heightened scrutiny and pressure recently. We remain close to our customers to understand how these changes are impacting them directly or indirectly.

To be successful in this environment, businesses must find a way to quickly adapt, anticipate change and transform not only to mitigate potential disruption but possibly even turn it into a strategic advantage. This transformation is not a one-time event. It's an ongoing evolution that drives perpetual adoption across every facet of business from responsive supply chain and rapid product development to future ready workforces. In short, perpetual change must be met with perpetual adaptability. A technology-led approach can turn these transformation goals into achievable realities. We are well positioned with our clients to help them transform their businesses for perpetual adaptability and to reinvest for future-proofing their business models for the long term.

Let me now give some specific color on our performance during the quarter and outlook for few verticals:

• BFSI clients continue to focus on initiatives led to modernization, cost optimization, vendor consolidation, regulatory spend. Banking and financial institutions are proactively addressing tech obsolescence via legacy modernization efforts. Examples being core platform upgrades and

payment operations and improved lending experience.

1. Data and AI initiatives are seeing significant adoption for driving operational efficiencies and improving customer experience.

1. Resilience and availability are being prioritized through cloud adoption and cybersecurity practice. o In the insurance sector in the US, we saw instances of delayed decision making.

• The Consumer Business Group saw heightened caution and delays in discretionary projects, especially in the US. This was driven by the significant drop in consumer sentiment in February, which preceded changes in global trade and tariffs creating a domino effect on retail CPG and TTH industries. However, prioritizing cost saving and defensive technology tech reduction and moderate introduction modernization initiatives especially on the interface digital core. There is fair interest in the adoption of next-gen technology such as AI, GenAI and IoT via relatively small projects.

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Tata Consultancy Services Earnings Conference Call

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• I'll now share an example of how we help the greenfield transformation to S/4HANA, consolidating multiple ERP systems and harmonizing process across the group. A leading European rail company partnered with TCS to drive enterprise transformation. TCS leverages its deep domain and ERP expertise to simplify harms and integrate over 200 disjointed systems and business processes across five major divisions. TCS implemented a unified and scalable digital foundation in a hybrid architecture, comprising of a greenfield implementation of a leading ERP digital core, a business technology platform and a suite of cloud-based SaaS solutions. The transformation focused on improving process consistency, data quality, operational stability, efficiency through automation, decision support and financial reporting. The platform is implemented in four languages, supporting operations across multiple geographies and diverse user growth. This has improved vehicle maintenance quality, enabled cross-division life cycle to enable cross divisional life cycle view of asset and real estate portfolio, delivered cost savings in fleet control room operations, construction projects, real estate management and procurement business driving increased punctuality safety and comfort for customers. This strategic initiative has strengthened the client's digital backbone and laid the foundation for future ready operations.
• In the technology, software and services industry, we saw modest growth through the quarter. Client IT budgets have remained flat, reflecting cautious optimism, amid geopolitical uncertainties and fluctuating inflation. Enterprises are now funding incremental technology upgrades through savings generated from optimization and rationalization efforts. Technology companies are leveraging GenAI to boost efficiency and experience across the value chain and also to optimize the software development life cycle. For a leading services company, TCS has redefined the software development life cycle by embedding GenAI-driven quality engineering across the organization. TCS established a centralized test center of excellence, integrating automation and GenAI across 150 plus critical applications developed with multiple tech stacks, powering over 500 release cycles annually. This COE elevated quality engineering from a traditional function to a catalyst for business growth, continuously improving time-to-market product quality and ensuring an exceptional end-customer experience. This transformation also led to a 50% reduction in overall manual effort, the elimination of manual testing expanded test coverage and improved consistency, significantly enhancing overall product quality.
• In Life Sciences & Healthcare, the client-specific challenges called out by us earlier are largely behind us. In Life Sciences, clients are significantly reducing operational costs and creating delivery models that align with our business goals, creating opportunities for vendor consolidation.

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Tata Consultancy Services Earnings Conference Call

April 10, 2025, 19:00hrs IST (08:30hrs US ET)

• In Healthcare, spending is seen in initiatives, including tech-led business transformation, cost optimization, strengthening of cybersecurity vendor consolidation and scaling GenAI. However, in healthcare, deals are taking longer to close. Customers are moving cautiously and prioritizing critical business initiatives. Growth programs are being either postponed or timelines are being reassessed.
• In Q4, we continued to see softness in Manufacturing. Auto industry is facing uncertainties due to EV downturn and turbulence in the ICE market with the burgeoning inventories. Auto OEMs are experiencing pressure, and we are seeing weak demand and cuts on discretionary spending. The aerospace industry is seeing a surge in demand for new planes and engines are struggling in the near term due to supply chain disruptions. In North America, momentum is building for cost optimization initiatives as part of renewals, vendor consolidation and automation, including GenAI. Cybersecurity and technical debt reduction initiatives are also gaining focus and momentum. For a leading luxury automobile OEM, TCS helped improve user experience by enhancing the ecosystem and vehicle architecture and making it future proof to cater to changing customer demands. TCS designed a high-performance system with high density, high-speed data communication with efficient power dissipating thermal management.
• The communications media and information vertical continues to encounter industry-specificchallenges and discretionary spend continues to remain under pressure. However, we saw growth improve this quarter led by demand from vendor consolidation, technology productivity and improvements programs. As businesses look to scale and secure their digital infrastructure in response to growing customer demands for individualized content and services. There is a noticeable movement towards cloud services and cybersecurity.
• The Energy Resources and Utilities vertical continues to grow well. We have a strong pipeline of opportunities from both existing and potential clients. Key factors contributing to this strength include investments in advanced technologies such as AI, GenAI, data analytics, and energy storage to enhance operational efficiency and reliability. There is a shift towards energy sources that will generate new markets and opportunities for energy companies.
• We continue to see traction in Growth Markets. Currently, we have a very strong deal pipeline, broad-based and robust TCV growth, led by a largely positive macroeconomic outlook, we expect to continue the momentum into the next fiscal. Key themes driving demand is public set in these

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