Tata Consultancy Services predicts hot viral mess for the next nine months

CEO says ‘pandemic completely reversed the positive momentum’ but at least its healthcare biz is strong

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Tata Consultancy Services (TCS) has posted slow growth and warned that it will be doing well to match that performance in its new financial year.

The Indian services giant last week posted is Q4 and full year 19/20 results. Revenue for the quarter was US$5.444bn, an increase of 0.9 percent year over year. Net income of $1.09bn and operating margin of 25.1 percent made for a decent quarter, but also some of the slowest growth in the company’s 20-plus year history.

Annual revenue was $22.03bn, net income $4.54bn and operating margin was 24.6 percent. That’s a little worrying as revenue rose a little over a billion year on year but net income climbed by only $48m. The company otherwise continued to put up big numbers such as 24,179 new hires to bring total headcount to 448,464, and winning 36 new customers spending $20m or more each year.

TCS singled out 16.8 percent year-on-year growth in its Life Sciences & Healthcare business as the highlight achievement of FY 19/20, ahead of 14.6 percent growth across and 10.4 percent in the UK.

And then came COVID-19.

“The pandemic completely reversed the positive momentum that we had started seeing in some of our biggest verticals in the first half of the quarter,” said CEO and managing director Rajesh Gopinathan.

On the company’s earnings call, Gopinathan and other execs said they expect FY 20/21 to be “challenging” but mentioned modelling that suggests Q4 20/21 should be back to pre-plague levels of revenue, profit and margin.

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Execs also expressed pleasure that TCS’ past investment in productivity tools has proven timely. Investors were also told TCS is preparing for more work on collaboration tools, business resilience, legacy system modernisation- especially COBOL apps on mainframes – plus plenty more work getting organisations into the cloud.

Investors also learned about TCS’ rapid work-from-home push, which saw the company’s own methodologies used to develop policies that made it possible for client work to be conducted off-site with the right security in place.

The company also credited its cloud partners for its successful switch.

“Our AWS experience over the last few weeks has been, I would say, amazing,” Gopinathan said. ®

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