Tata Consultancy Services says pandemic's most powerful punches landed in Q1 - and it's still dancing

Revenue fell eight percent but company thinks it can win on new virus-scoured terrain

Tata Consultancy Services (TCS) has become the first of the big Indian technology services companies to report a quarter’s results and while revenue was down the company found many bright spots that suggest better times lie ahead.

The numbers were not pleasant: year-on-year revenue fell 7.8 percent to $5.059bn and net income dropped 20.8 percent to $925m. Every vertical the company serves was in trouble, save for health and life sciences which saw a 13.8 percent revenue hike. Continental Europe delivered 2.7 percent growth and Latin America eked out 0.2 percent revenue improvement. The company ended the quarter with 443,676 people on staff, down from 448,464 in the previous quarter.

But execs said they believe Q1 will be the bottom the pandemic-induced economic downturn and outlined plenty of bright spots they think support their optimism.

Deal closures, for example, continued at close to the usual pace. Customers held off on some deals, but generally saw tech as a critical part of both their immediate pandemic and their recovery plans. Future deals contain a nice mix of giant deals and work with smaller clients.

Seven new financial institutions signed up for its core banking applications, four of them signing for SaaS. Execs said that’s an indicator that the financial services industry is warming to SaaS for even critical workloads and as TCS offers them they see plenty of upside. Clients in other industries increasingly turned to the company’s packaged solutions for apps and cloud infrastructure, validating TCS’ creation of ready-to-roll products.

Innovation continued, as shown by the debut of a new AI-infused product for fashion retailers that can apparently predict what people will want to wear. The company also cooked up a contactless retail application to encourage shoppers back into stores.

Investors were told that TCS believes the pandemic have created a “long term structural opportunity” for the company and that it believes it can win an outsized share of future work thanks to its product mix and talent pool.

But investors were also given many reasons for caution.

TCS doesn’t customarily issue guidance and again declined to do so when discussing this quarter’s results. Execs said they see improved governmental response to the pandemic and demand returning in Europe, but could only say they are “cautiously positive about the US”. ®

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