TCS Share Value Dips as IT Giant Reports Lower-than-expected Q3 Profit

Written by: Arjita

Edited by: Aniket

Last Updated: January 10, 2023

The IT Giant, Tata Consultancy Services (TCS) has reported a lower-than-expected profit for the third quarter. This Q3 ended on December 2022 (Q3 FY23), churning a revenue greater than estimates. Yet, the profit mark could not cross the minimum barrier the organization had set. After the announcement of Q3 low profits, the TCS shares decline in value by over 2% on BSE in the opening deals for Tuesday. For the lowered profits, the management held the challenges the company faced in Europe, where their clients raged the rough economic conditions by tightening spending and laying off employees for the first time during the period of the pandemic.

Among its peers, TCS is the first to report its quarterly earnings. It gives an idea as to the restrained economic conditions not just for Tata Consultancy Services, but other companies as well, which had otherwise led the pandemic with a boom in business. However, as the demand was substantially gone down, several firms are reducing spending and shrinking the workforce. The Tata Group flagship reported that as of 31 December 2022, the employee count was reduced by 2,197.

Recently, a few e-commerce and IT companies cut down on employees citing the pandemic era as the reason for massive hiring, and the current scenario of over-staffing. To keep the company profits afloat and to manage expenditures, TCS and several other organizations are walking the same line. TCS said that it will provide a special dividend of INR 60 per share to the shareholders with an interim dividend of INR 8.

Earlier, in the three months ending 31 December 2022, the consolidated net profit rose to ($1.32 billion) or INR 108.46 billion. This was a considerable spike from the previous year’s quarter that ended in December, reporting INR 97.69 billion in the exchange filing. The expectation was 110.46 billion Indian rupees as the average profit. In the September quarter, the profit was $8.1 billion, which dipped to $7.8 billion in October-December as per the TCS’s order book.

Market participants set TCS as a benchmark for what to expect from the demand outlook for the IT sector, which now presumably presents a bleak situation as the recession is underway for Europe and the U.S. TCS and several other multinational companies derive a bulk of their revenue and profits from these regions.

Tata Consultancy Services (TCS), the Indian multinational IT services and consulting company, has reported a dip in its share value following the release of its Q3 profit results. The company reported a profit that was lower than what analysts and investors had expected, causing concern among shareholders. Tata Consultancy Services, popularly known as TCS, is a publicly-listed company on the Bombay Stock Exchange and the National Stock Exchange of India. In the quarter ending December 31, 2020, TCS reported a profit of Rs 8,701 crore, which is below the Rs 9,000 crore that analysts had predicted. The company's revenue also fell short of expectations, coming in at Rs 40,135 crore, compared to the predicted Rs 40,400 crore.